Schroders to target sustainability and impact with fund launches

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Schroders will look to ESG, sustainability and impact solutions as it aims to build out its range of funds and investment trusts.

In November, Schroders said it would integrate ESG across all of its investments by the end of 2020.

Then, Schroders’ Sustainability Accreditation encompassed more than half of its £230bn AUM, with an aim to cover 100% by end-2020.

Schroders said the in-house accreditation helps its clients distinguish how ESG factors are considered across its products.

The accreditation spans ‘screened’ funds, which actively exclude certain activities; ‘integrated’ funds, which consider ESG factors throughout the investment process; ‘sustainable’ funds, which seek to identify the most sustainable companies; and ‘impact’ funds, which look to achieve specific and measurable ESG impacts.

Schroders’ head of UK intermediary Doug Abbott (pictured) told II’s sister title Investment Week that process remains on track.

“All offerings from Schroders will be, within their investment process, very cognisant of ESG,” he said. “It is something we are very passionate about.”

Looking further out, Abbott added there was “clearly a growth in interest” from clients for “allocating specifically to sustainable funds, or even funds that are dedicated more towards impact and positive change”.

As a result, he explained, the firm will look to bring “a range of strategies in [the sustainability] area into the UK market” within global equities but more specifically the UK equity space, “which is where most clients in the UK seem to be allocating at the moment”.

Abbott added Schroders was keen to continue to add to its presence in the closed-ended market, too. The firm recently announced the launch of the Schroders British Opportunities Trust (SBOT), which will seek to raise £250m to invest in “the future growth of British business”.

A second investment trust launch could soon follow, with Abbott revealing the firm was looking at bringing a fund to the market that focuses on impact investing within the private asset space.

Schroders recently bought BlueOrchard, an emerging market focused impact investment manager that specialises in microfinance and impact investing across asset classes, including credit, private equity and sustainable infrastructure.

Abbott said ESG was an area at which Schroders was “very strong”, but reasoned “we need to offer more in terms of product to the market so people can make active decisions to invest with us in the space”.

“If you invest with Schroders, all of our funds will have that ESG integration, [but] I think there is another level where people are looking for dedicated approaches that go another step forward in terms of the way they allocate.”

SBOT, which will be run by the firm’s head of equities Rory Bateman and head of UK and European private equity Tim Creed, will look to provide long-term total returns by investing in both public and private UK firms.

Abbott claimed there was “a once-in-a-generation opportunity” to invest in some “really interesting and innovative” UK companies. The trust would look to “support them at a time where the UK economy is struggling because of the lockdown [and] because of that there are some good quality companies out there that you can invest in at really interesting valuations where, over the long run, you can make some really good returns on capital”.

The trust would be differentiated from the Schroder UK Public Private Trust (SUPP), run by Creed and head of data insights and research innovation Ben Wicks, by investing in more mature companies. SUPP remains more focused on early-stage businesses.

“[SBOT] is very much about a specific market opportunity. It is going to have a seven-year life as a fixed vehicle, so we are looking to make the most of that current opportunity.”

The recent launch of Schroder Portfolios saw the firm collaborate with Benchmark Capital and fund research agency RSMR for a suite of six unitised multi-manager products that blend active and passive management.

Abbott said Schroders is “excited about those” portfolios. “We think they offer to advisers the best of active and passive with a reasonable fee and an enormous amount of resource behind them,” he said.

Abbott added the firm wanted to “bring more of Benchmark Capital to the adviser market”, calling the company “the largest MPS provider you have never heard of in the UK”.

“Working collaboratively with [Benchmark Capital], we can offer a lot more to advisers not just in terms of investment solutions but in terms of a network [through its Aspect8 IFA business].”

In terms of fund management, the company has seen a number of high-profile and long-serving managers retire in 2019 and 2020, including Jenny Jones, Andrew Rose and Matthew Dobbs.

All three have been replaced internally – by Bob Kaynor, Masaki Taketsume and Richard Sennitt respectively – and Abbott said that showed “the depth of talent we have”.

Succession planning is “an ongoing process, because the market always wants to see that you are more than a one-person band”. 

“One of the strengths of a big house like Schroders is you have within the business in every area talent coming through.

“We have worked hard to make sure that for almost all portfolios there is a succession plan and a group of people who can take on the mantle if there are departures.

“That is vital from a client perspective. Key person risk is huge when people are allocating money to a fund manager. We are not keen on creating a star-manager culture where everything relies on one person; we are very much about a collaborative team-based approach.”

Source: https://www.internationalinvestment.net/

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