In a time of ‘me too’ fund launches, why should you care about the launch of the Royal London Global Sustainable Equity Fund?
Well, for starters it is distinctly different from other sustainable global equity funds. Royal London Asset Management (RLAM) has a long and successful history in sustainable investing, yet we haven’t launched a new sustainable fund for eight years.
Our Sustainable Leaders Trust was launched in 1990, and our Sustainable World and Sustainable Diversified Trusts each celebrated their 10th anniversaries last year.
We have focused instead on evolving our sustainable investment process and developing our research resources to deliver consistent top-quartile performance.It’s a privilege to launch a new fund.
We wanted to ensure it was sufficiently different from our existing funds, yet retained the expertise and focus that has informed the success of our current range.
We believe we’ve got this balance right and have benefitted from the experiences – good and bad – of other global fund launches. We think of this as ‘last-mover advantage’.
The new fund will expand our existing product range using the same equity-only structure as our UK fund, Sustainable Leaders, and be truly global.
This will make the fund attractive to wealth managers and complement the existing Sustainable World Trust, which offers a mixture of equity and debt for those seeking less volatility and more income than a pure equity global fund.
Another important differentiator is our decision to use the MSCI All Countries World Index (ACWI) as the fund’s benchmark, rather than the MSCI World Index.
This brings into play 26 emerging markets (EM) countries as well the 23 existing developed markets (DM).
This creates a larger opportunity set to seek out the best sustainable companies globally, including in technology-rich, high-growth countries like South Korea, China and India.
It also dials down the US from 64% to 56% of the index.Some may fear this materially increases the risks of the fund compared to more prosaic developed markets funds, yet this fails to understand the impact and value of sustainable investing.
The world is changing. How emerging markets develop is crucial for its sustainability. It has become clear that EM countries will no longer follow the traditional development path of their DM counterparts.
This dynamic is creating new risks and new opportunities for companies and investors.Previously, investors have drawn hard lines between developed and emerging markets, but the geographic distinctions are increasingly blurring.
Many EM companies have significant DM operations and revenues, and vice versa. It is increasingly difficult to define companies this way.
Despite the best efforts of President Trump’s tariffs and coronavirus to disrupt global trade, the DM-EM confluence is set to continue.
Also, as environmental, social and governance standards gradually improve in emerging markets, the ACWI benchmark ‘future proofs’ the fund with the flexibility to invest in the world’s best sustainability ideas regardless of where they are listed.