This article is part of premium content

To read full article, please log in or sign up for a free trial

Affected Fund(s):  PGIM QMA Global Core Equity ESG Fund
Asset Classes:  US and Non-US Equities
Management Company:  PGIM Investments (Newark, NJ)
DD Concern: New untested mandate
Marketing Considerations:  This investing approach emphasizes a value-based strategy and avoids exclusions of industries and companies.  The integration of securities of companies with varying level of ESG ratings could offer a solid competitive edge.  Even if doesn’t perform as hoped, it at least indicates that the firm is grounded in future sustainable product management techniques.

December 10, 2018

DUE DILIGENCE Alert:  MODERATE
COMPETITIVE Alert:  2
Event:  RBC strengthens its US responsible investment capabilities.
Briefing Points: 
i) RBC has promoted two senior staff members to its US based impact and responsible investment group, ii) Ronald Homer is the group’s new Chief Strategist for impact investing – previously he was managing director and institutional portfolio manager, president of RBC GAM capital strategies team, iii) Catherine Banat has also been promoted to director of responsible investing and platform distribution – she was previously a pm with the firm.
Affected Fund(s):  All RBC mutual funds and SMAs
Asset Classes:  All
Management Company:  RBC Global Asset Management (Boston, MA)DD Concern:  Portfolio management team change
Marketing Considerations:  The firm’s dedication to sustainable investing is reinforced by the promotion of such senior, long-term staff members.  The possibilities for broader firm wide and product distribution changes is to be expected.

December 6, 2018

DUE DILIGENCE Alert:  HIGH
COMPETITIVE Alert:  3   
Event:  DWS introduces two new ESG ETFs.
Briefing Points:  i) DWS has added 2 new ESG ETFs to its xTrackers product line with an emphasis on providing heightened ESG transparency, ii) The ESG Leaders Equity ETF provides exposure to non-UD developed equity markets, while the Emerging Markets ESG Leaders focuses on developing economies, iii) Both ETFs are benchmarked to MSCI indices and hold companies screened by MSCI for their ESG standing.
Affected Fund(s):  xTrackers MSCI ACWI ex-USA ESG Leaders Equity ETF,  xTrackers MSCI Emerging Markets ESG Leaders Equity ETF
Asset Classes:  Non-US Equities
Management Company:  DWS Group GmbH (Germany)
DD Concern:  Portfolio management consistency
Marketing Considerations:  The new additions are in part, designed to address the ESG transparency concerns and as such, represent a start in that direction.  The reliance on 3rd party ESG rating’s provider is, however, only a partial fix.

December 5, 2018

DUE DILIGENCE Alert:  LOW
COMPETITIVE Alert:  3
Event:  New off-shore climate fund from UBS offers added tax considerations.
Briefing Points:  i) UBS is offering a new Ireland domiciled UCITS off-shore fund that is tax efficient i.e., Tax Transparent Fund (“TTF”), ii) Offered in collaboration with Systematic Investment Management, AG, the fund has a reduced carbon footprint objective – it is passively managed (50-60%) against the MSCI World Index with weightings to reflect companies positions to benefit from renewable energy and associated technology, and iii) The fund will not eliminate carbon-emitting companies, but will underweight them and apply proactive proxy voting to impact their business models.
Affected Fund(s):  IBS CCF (IE) Global Climate Aware UCITS Fund
Asset Classes: US and Non-US Equities
Management Company:  UBS Asset Management (Switzerland)
DD Concern:  New untested mandate
Marketing Considerations:  While not of direct concern to domestic competitors, the fund’s conscious goal of moving beyond “niche investing activity” should be recognized.  Eventually, their approach is likely to be transferred to the domestic market and offer an answer to concerns about sustainable funds exclusionary methods being too “broad-brushed”.

December 5, 2018

DUE DILIGENCE Alert:  MODERATE
COMPETITIVE Alert:  2
Event:  Sustainable version of Russell indices in 2019.
Briefing Point(s):   i) FTSE Russell announced plans to offer sustainable versions of the Russell 1000, 2000, and 3000 indices, in early 2019, ii) Russell is working with Sustainalytics.  While the new scoring approach is still being established, the firm who will provide ESG risk ratings and the analytical approach for scoring index constituents, iii) The new indices are in response to growing investor interest and sustainable fund offerings – S&P Dow Jones has offered a sustainable version of its S&P 500 Index for several years.
Affected Fund(s):  Russell sustainable 1000, 2000, 1nd 3000 indices (to be named)
Asset Classes:  US Equities
Management Company:  FTSE Dow Jones & Company (New York, NY)
DD Concern:  Change in product line
Marketing Considerations:  This is welcome addition for active as well as passive ESG managers and investors.

December 3, 2018

DUE DILIGENCE Alert:  MODERATE
COMPETITIVE Alert:  2
Event:  Tortoise buys London-Based hedge fund manager Ecofin.
Briefing Points:  i) Tortoise. LLC (Leawood, KS) has acquired Ecofin Ltd., a privately held hedge fund manager, that focuses on energy infrastructure industries, utility sectors,  and sustainability investments, ii) Ecofin’s possesses global advisory expertise and its customer-base is non-US institutional, HNW, corporate and pension plans, iii)  Tortoise currently has over $20 billion in AUM, largely for domestic clients.
Affected Fund(s):  Ecofin Global Utilities & Infrastructure Trust, plc.
Asset Classes:  Non-US Equities
Management Company:  Ecofin Holdings Limited (London, UK)
DD Concern:  Merger/acquisition/divestiture
Marketing Considerations:  The acquisition make sense from the standpoint of corporate integration and market expansion, particularly in non-US markets and for hedge funds.  Due diligence related to management approach integration is warranted.

December 3, 2018

DUE DILIGENCE Alert:  LOW
COMPETITIVE Alert:  3
Event:  New ESG ratings planned for funds on UBS platform.
Briefing Points:  i) UBS Global is implementing a ESG rating system for all in-house and third-party funds on its wealth management platform, ii) The ESG scores will be operationalized in 2019 for all long-term fixed income and equity mutual funds, SMAs, and ETFs on UBS’s non-US platform – scores for approximately 150 portfolios on the firm’s US platform’s select list will also be offered, iii) The ESG scored will be generated by UBS’s Global Wealth Management research team.
Affected Fund(s):  UBS Global Wealth Management’s Wire House Platform selections
Asset Classes:  US and Non-US Equities and Fixed Income
Management Company:  UBS Global Wealth Management (New York, NY)
DD Concern:  Company or fund product governance/culture
Marketing Considerations:  The new internally generated ESG scores help distinguish and reinforce the firm’s commitment to sustainable investing.  At the same time it strengthens the platforms competitive position.  Given material variations in approaches to sustainable investing on the part of funds and ETFs, UBS’s effort should serve to standardize the different sustainable investing approaches and anchor investor expectations.

November 29, 2018

DUE DILIGENCE Alert:  LOW
COMPETITIVE Alert:  3
Event:  New collective ESG investment fund planned by Decatur Capital.
Briefing Points:  i) Decatur Capital Management has selected Hard Benefits & Trust (“HB&T”) to create a new RSG collective investment fund (“CTF”), ii) The new CIF will be 404(a)(5) compliant and be distributed to qualified retirement plans, iii) The new CIF will invest mainly in large-cap companies and “trade on most recordkeeping platforms.”
Affected Fund(s):  Decatur Capital US ESG Strategy
Asset Classes:  US Equities
Management Company: Decatur Capital Management, Inc. (Decatur, GA)
DD Concern:  New untested mandate
Marketing Considerations:  When available, the new offering will provide an offering to a specialized niche market having potentially substantial growth potential.

November 30, 2018

DUE DILIGENCE Alert:  LOW
COMPETITIVE Alert:   3
Event:  Bridgeway Capital Management adopts no tobacco company language in prospectus.
Briefing Points:  i) The $595.0 million fund, at 15 basis points, seeks to replicate the total return performance of the Bridgeway Ultra-Large 35 Index by investing in blue chip company stocks included in the index that are equally weighted, ii) stocks are selected using a statistically driven approach, iii) Tobacco companies are excluded from the index.
Affected Fund(s):  Bridgeway Blue Chip 35 Index Fund
Asset Classes:  US Equity
Management Company:   Bridgeway Capital Management, Inc.
DD Concern:  Change in Risk Profile
Marketing Considerations:  The fund excludes any tobacco companies, but tobacco companies is not a defined term and should be clarified.

November 27, 2018

DUE DILIGENCE Alert:   LOW
COMPETITIVE Alert:  4
Event:  M&G Investments offers new equity impact fund.
Briefing Points:  i) M&G Investments’ new fund’s selections will come from the MSCI All Countries World Index of 2500 global stocks of companies operating in “countries where there are social issues,” ii) The fund will be comprised of 30 to 40 stocks meeting M&G’s Positive Impact team’s mission of targeting “companies that are already having impact on society,” iii) The fund’s selections are expected to be weighted by “mid-size and emerging market stocks”.
Affected Fund(s):  M&G Impact Equities Strategy
Asset Classes:  Global & Emerging Equities
Management Company:  M&G Investment Management, Ltd. (London, UK)
DD Concern:  Overweight or concentration, shift or tilt or ESG positions
Marketing Considerations:  The manager’s focus on companies offering potentially large impacts in countries with “social issues” goes beyond what most sustainable funds now offer.  If successful, this is a positive product advantage and potential selling point both for non-US and US markets.

DEFINITION — ALERT RATINGS
_________________________________________________________________
Due Diligence (“DD”) Alert: Ranks each identified sustainable fund event or development according to a three-point “call to action” scale that ranges from Low to High, defined as follows:
LOW:  A preliminary review and evaluation is recommended, but no on-going monitoring or manager meeting is needed.  Non-US fund offerings will typically be assigned Low Due Diligence Alert levels as these are largely intended for informational purposes and potentially these may have marketing considerations locally.
MODERATE:  Near-to-mid-term review and evaluation is recommended along with a manager meeting.
HIGH:  Immediate manager contact and meeting are recommended, plus detailed review and evaluation – scheduled on-going more detailed monitoring and follow-up manager meeting(s) are advised.

Marketing Considerations:  Ranks the level of required response/urgency for each identified sustainable fund’s product development, sales, promotional or other strategic marketing event or development.  The ranking scale is 1 to 5, where a rank of 1 indicates the lowest level of urgency, requiring little or no competitive response, to a rank of 5 that indicates the highest level of urgency, requiring immediate competitive and/or marketing and sales force response.