IM|Power recently teamed up with SharingAlpha to present the 2020 Wisdom of the Selector awards, which gave an opportunity to celebrate leading ESG funds, driving new standards and delivering alpha across a variety of categories. We interviewed each of the winners to find out what makes their funds stand out and how they’ve protected investments against recent market volatility. You can see the full list of winners and runners up here.
Following Allianz Global Sustainability's win in the Global ESG Equities category, we spoke to Allianz Global Investors, to find out more about the services and products they offer.
Tell us, what makes your fund stand out compared with your peers?
The Allianz Global Sustainability strategy has a track record that dates back to 1999, with a mutual fund that was set up in 2003. The lead portfolio manager, Paul Schofield has been involved with the strategy for over 19 years and brings all of this experience to bear in his management. Alongside his deputy PM Jeremy Kent, Paul draws on a Sustainability Research team which traces its own roots back to the year 2000. This team provides input on our proprietary SRI Ratings methodology, enabling us to reach independent conclusions about company ESG performance, rather than simply relying on the ratings of external providers.
Similarly, our bottom-up fundamental approach relies on industry-leading company research, backed by investment professionals across over 27 offices. Lastly, our active approach to proxy voting and engagement ensures that client money is delivering not only a financial return, but also positive measurable impact in terms of ESG performance.
How do you protect investments against the kind of market volatility we’ve seen this year?
We take a fundamental and long-term approach, seeking to invest for a time horizon of at least five years. This is both to harvest the compound power of returns, but also better execute our role as stewards of client capital. In the context of such a time period, patches of volatility – while not entirely without concern – more often than not offer opportunity rather than reason to fear.
At a company level, we invest on a bottom up basis, seeking to own companies that generate sustainable growth through their own dominance in a niche market or technological edge. As such, they should be able to sustain this growth regardless of economic cycles. If we are comfortable that our investment case has not been broken, then the stocks themselves should be more defensive in a down-turn (rather than requiring “protection”. Likewise, these types of stocks, if overly punished in a downturn, can be attractive from a valuation perspective. It is for this reason that in Q1 of this year, we initiated several positions in companies which had been appealing for a long time, but until recently, looked overly expensive.
Why is an active manager the best way to invest sustainably?
Active asset managers take specific decisions about the companies they invest in. In the Allianz Global Sustainability fund, these are around 50 businesses with strong financial fundamentals, as well as demonstrated commitment to superior Environmental, Social and Governance performance. Each stock is analysed by the entire Global Growth team from the bottom-up before it is eligible for inclusion. It is then down to the Global Sustainability portfolio managers to construct the portfolio at a single stock level. By contrast, a passive fund sets a loose set of criteria which indiscriminately capture hundreds, maybe even thousands of stocks in a portfolio.
Our ability to filter out stocks, means that client money is only going to businesses which we have deemed to satisfy both our financial and ESG criteria. Over the years, we have seen numerous examples where prestigious companies that were deemed financially sound have proved not to be so. The same is true in ESG – in the UK for example, the clothing manufacturer Boohoo was recently accused of sourcing clothes from sweatshops. Yet the stock was in many so-called “ethical” funds.
Lastly, as an active manager we take a clear stance on proxy voting and engagement. Our concentrated fundamental approach means that we exercise our right to vote at every Annual General Meeting in line with our policies, which cover topics like climate change, executive remuneration and employee diversity. Similarly, over the course of our owning a stock, we will engage with management to explore how they are tackling ESG issues, and make the case for any changes.
