Launched in June 2009, the £65m FP WHEB Sustainability fund is a global growth portfolio with a sustainable focus. Benchmarked against the MSCI World index, it aims to outperform both the index and its IMA Global sector peers.
Manager Tim Dieppe took over management of the fund in April 2012 when he and his team joined from Henderson Global Investors. Their arrival signalled a revamp of the process and an expansion of the team, with Mr Dieppe and his colleagues establishing a “more rigorous process” for the fund, which up to that point had seen a disappointing performance.
The portfolio is now a multi-thematic fund focused on nine areas around the topic of sustainability, incorporating both developmental and social themes. These include cleaner energy, environmental services, health, resource efficiency, wellbeing, safety, education, sustainable transport and water management. Mr Dieppe explains: “All of these have strong, long-term growth drivers from demographics, climate change, regulation and various other pressures that the companies we invest in are well placed to benefit from by offering solutions.”
The team has built up a universe of more than 1,000 companies that fits into the nine themes, which are then narrowed down through methods, including quant screens, company meetings and analyst recommendations. “We then look at a company in some detail to see if it is worth investigating further and we will perform rigorous fundamental analysis incorporating environmental, social and governance factors,” the manager says.
While macro factors are not ignored, he points out the investment process is predominantly bottom up, with just 20 per cent driven by top-down factors. He says: “We don’t try to make macro calls in terms of regional bets, we keep regional allocation quite close to the MSCI World index. We are adding value relative to the MSCI World index through theme exposure, which gives us a very different sector breakdown, and through stock selection.”
The fund sits towards the riskier end of the spectrum with a synthetic risk-reward indicator of six out of seven, according to its key investor information document, while its ongoing charges are 1.07 per cent.
For the five years to November 4 2014, the fund has delivered a reasonable 27.49 per cent, although this significantly lags both the MSCI World index return of 75.19 per cent and the IMA Global sector average of 56.64 per cent, according to data from FE Analytics. However, the performance of the fund since Mr Dieppe and his team took over has been much more positive, outperforming the IMA Global sector average in both 2013 and 2014 for the year to date.
In addition, between April 30 2012 and November 4 2014 the fund delivered a return of 36.64 per cent, which outperformed the IMA sector average of 30.5 per cent, although it continued to lag the MSCI World index return of 40.29 per cent.
Mr Dieppe explains: “Part of the reason for this is that we’re more exposed to mid-cap companies than the MSCI World index as that is the nature of our themes. We are more mid-cap-focused and mid caps have underperformed large caps this year, so that has been a headwind for us. In the fuel sectors, where our efficiency theme and environmental services theme sit, we haven’t done as well. But health and cleaner energy have performed quite well.”
Looking ahead, the manager expresses some nervousness about current market levels, given how they have recovered “amazingly well” from the sell-off in September and October. He says: “The US is on an all-time high and Japan has been a key catalyst lately. We’re somewhat nervous about market levels, particularly that concerns about the macro economy in Europe haven’t been factored properly into thinking about the markets.
“The US economy seems to be holding up quite well but Europe, and indeed China and other emerging markets, are looking a bit vulnerable at the moment, so we need to see how that develops. But I think the market could do with either consolidating its gains or coming back a bit and reassessing before making progress again into next year.”
EXPERT VIEW
Juliet Schooling Latter, research director, Chelsea Financial Services
This fund provides investors with access to a new generation of sustainability themes with powerful, long-term growth drivers. Tim Dieppe applies a disciplined, multi-thematic approach, with a focus on mid-cap companies that provide a solution to critical environmental and social challenges. The fund is unconstrained with a focus on “growth at the right price”.
