Following Aviva's recent decision (see announcement), made public earlier in August, the UK investor keeps its SRI fund offering, though outsourcing their management to Alliance Trust. This strategy contrasts with the earlier decision of Henderson to eliminate their SRI research capabilities altogether, handing over the management of their SRI investments to regular portfolio managers, and relying on a third-party ESG data provider for sustainability insights.
Aviva’s approach offers a great advantage while securing the vital cost cutting goals. With their strategy, Aviva does not compromise the quality of their SRI offering, as these funds will continue to be handled by the capable hands of the team led by Peter Michaelis, though he will be able to share his expertise with his new colleagues at Alliance Trust Investments.
Instead, Henderson SRI cost cutting could come at the expense of the quality of the firm’s SRI expertise. While Eiris provides undoubtedly some of the best SRI research available, many would think that this input alone will struggle to compete with the expertise and resources offered by an established SRI management team. Henderson’s former SRI team, now employed at WHEB Asset Management, could be missed quite soon if retail investor started to favor those firms still committing themselves to the highest SRI research capabilities.
Aviva Sustainable Future Managed Fund, the £317m AuM, Henderson’s largest SRI fund, is being co-managed by Coling Purdle and Peter Michaelis. Their strategy to invest in Inditex, a sustainability-committed Spanish fashion retailer, and earlier on in GlaxoSmithKline, once its US liabilities have been put behind, while divesting from stocks such as HSBC, seem to be paying off. According to Lipper Hindsight, during the first part of 2012, the fund outperformed the sector average achieving a 5% performance.
Sadly though, as Aviva and Henderson recent decisions demonstrate, Sustainable Investing is one of the units most at risk when it comes to cutting costs. It would appear that SRI investments are not the money maker that some might have expected to be. However, any long term strategy will have to prepare mainstream investors too for a decent degree of ESG integration, as signatories of the UN PRI….do they plan to achieve that without an in-house ESG team? Here we go again, short-termism being imposed to long-term decision making!
