Innovating in Sustainability and Diversified Returns
Redington was founded on the belief that there was a better way of doing things. We always begin with the end in mind, pushing ourselves and our clients to create better outcomes.
When advising wealth managers, this starts with understanding the needs of long-term savers. Using this we can design and create solutions that are aligned to meeting their needs and achieving better outcomes.
Over 2018 the wealth management industry faced (amongst other things) two big questions:
How can we invest in a sustainable way without sacrificing returns?
The recognition and understanding of ESG (Environmental, Social, Governance) is rapidly increasing in all industries. Not least asset management. Pressure is being placed on the industry to consider the impact of investments, and more asset owners are requiring their investments to be managed sustainably. 47% of investors want their investments to have some element of positive impact (according to the Good Money Week 2017 public poll). The response to this has typically been screening the opportunity set and excluding those securities that don’t meet a broad definition of ethical or sustainable. The result of this approach is more-often-than-not unsatisfactory from an investment outcomes perspective. There must be a better way…!
How can we generate return from alternative sources?
Long-term retail savers are often constrained to traditional asset classes (bonds and equities). This hasn’t been an issue over the last 10 years. Since the financial crisis, global equity markets have delivered returns of nearly 10% a year (despite the recent October wobble) and falling interest rates have seen bond markets deliver returns of almost 5% p.a. Looking ahead, clients are faced with interest rates at an all-time low and compressed risk premium in traditional asset classes. Cue alternative investment options!
We have supported one of our clients, St. James’s Place Wealth Management (SJP), in responding to these questions through the launch of three new strategies.
SJP Sustainable and Responsible Equity Fund (managed by Impax Asset Management)
- This fund is an active global equity fund with sustainability at the heart of the process.
- It invests to outperform global equity markets and clients benefit from the transition towards a sustainable global economy.
- The manager integrates ESG as a source of alpha and an element of risk into a more traditional fundamental quality process. Impax is a well-established specialist in ESG investing and sustainability is in the firm’s DNA.
SJP Diversified Assets FAIF (managed by KKR)
- Designed to give clients alternative sources of return through allocating to a diversified portfolio including private assets.
- Expanding the investment universe to include private assets could improve outcomes for long-term savers today and in the future. These areas of the investment universe have typically only been accessible to institutional investors, with large sums of capital, ultra-long investment horizons and low liquidity requirements. This fund now allows retail investors to access an asset class which has previously been out of reach.
- When investing in private and less liquid assets, it is crucial to ensure you do this with the right manager who can source good quality assets. KKR are market leaders with global reach and a strong track record in allocating across private equity, real estate, infrastructure, private credit and public credit.
SJP Alternative Asset Fund (managed by Wellington)
- This fund aims to help clients achieve a differentiated and diversified source of returns from publicly tradable markets with lower risk than equity markets.
- There are three components to this fund that together provide a low expected correlation to the broad market whilst providing attractive risk adjusted return:
- Investing in asset classes to benefit from clear trends in the market (both upward and downward)
- Investing in specific stocks or markets that are expected to do well whilst hedging (or shorting) the market risk to isolate the value
- Investing in risk-controlled way to keep volatility at around 8% per annum.
“These developments reflect our continued commitment to identifying new investment opportunities for our clients and selecting the best fund managers from across the globe to manage our range of funds, providing a tangible demonstration of the benefits of our investment management approach. Our focus remains to provide clients with a diversified range of funds to meet their long-term investment objectives.”
– Chris Ralph, Chief Investment Officer, St. James’s Place Wealth Management