The firm writes that the new fund specialises in US owner operators and follows the success of the long/short strategy since inception in November 2022. 

Owner-operated firms represent 10-to-15 per cent of the publicly traded equity universe in the US, mostly in the small and mid-cap space. The firm writes that these are frequently companies with little coverage by Wall Street analysts. The concept of owner operators focuses on management teams that generate their income primarily from equity value creation, rather than through their salaries and bonuses.

Proprietary analysis into whether a company satisfies the team’s ‘owner operator’ criteria is a pre-requisite for investment, but not enough on its own. Crawford also looks closely into the positioning of a company with reference to the environment in which it operates, free cash flow generation potential, the quality of its balance sheet, its fundamental valuation, and the quality of its management. The Strategic US Opportunities Fund’s portfolio will hold between 20 and 50 positions.

“We’re looking for the ‘crème de la crème’ of US small and mid caps,” says Christopher Crawford, Chief Information Officer at Crawford Fund Management. “We are continually seeking companies with the right business model at the right price and run by the right people.”

“We are delighted to work again with Crawford with this new long-only venture,” says Andreas Söderholm, Head of Eric Sturdza Investments. “The fund offers a unique way to invest in stellar companies in the US. Our goal is to continue to outperform the US market, as Crawford has done over the last 15 years.”

The firm writes that Indosuez Funds – Impact is a solution offered to equity investors looking for meaningful routes into ESG investing. Each investment is carefully assessed for its potential to contribute positively to the achievement of at least one of the UN’s Sustainable Development Goals, whether it is working on health, food, or social and financial inclusion needs, supporting the environmental transition, or promoting the circular economy and digital access.

“In tangible terms, selected impact companies are assessed using an internal methodology based on three dimensions:

•               Intentionality: ensure that the company contributes to a sustainable development issue and has a positive and measurable social and/or environmental benefit;

•               Materiality: verify that intentionality is followed by actions that have a real impact on the objectives set;

•               Measurability: ensure that social and/or environmental externalities are measurable, in particular through a transparent impact report.”

Companies’ contributions to the various issues addressed by the Indosuez Funds – Impact fund will be detailed each year in an impact report using qualitative and quantitative metrics. This report will be made available to investors, in order to tangibly illustrate the impacts generated by their investments.

Based in Paris, the fund’s management team makes use of in-house ESG and impact analysts and receives support from all of Indosuez Wealth Management’s experts, including local knowledge from experts located in the various Group entities.

Delphine Di Pizio-Tiger, Global Head of Asset Management at Indosuez, says: “Our clients are increasingly keen to invest in companies running projects with a positive impact on the environment. We ensure this, including through transparent and targeted reporting that allows us to check the positive social or environmental impact of companies on the real economy.”

The firm writes that BSSF is designed to meet the strong demand for securitised assets from both institutional and wealth clients seeking access to diversify their fixed income exposures. Clients have demonstrated a desire for the diversification benefits, limited interest rate risk and the yield premium securitised assets typically offer versus corporate credit.

The fund utilises BlackRock’s experience across global Securitised assets, to identify unique and attractive investment opportunities. BlackRock manages over USD120 billion of securitised assets globally on the platform.

Kate Galustian, Lead Portfolio Manager, BlackRock Senior Securitised Fund and Head of European ABS, says: “The BlackRock Senior Securitised Fund leverages BlackRock’s experience in the Securitised market to identify unique and attractive investment opportunities that have the potential to offer clients attractive risk-adjusted returns throughout the cycle. The fund seeks to maximise total return by investing in high grade, predominately AAA, securitised assets, in a manner consistent with the principles of ESG-focused investing.”

Anne Parthiot-Mons, Head of BlackRock’s EMEA Institutional Client Business and Co-Head of BlackRock’s Global Consultant Relations Business, says: “In close collaboration with BlackRock’s global investment teams, clients, and investment consultants, we are delighted to offer our Securitised Credit capabilities in the shape of a pooled fund. The fund is designed to meet the growing international demand across institutional and wealth clients for securitised assets and the diversification benefits that they offer for clients’ fixed income exposures.”

Ajith Balan Nair, Head of Investment Research, ISIO, says: “We like high quality ABS as an asset class for the yield premium versus corporate credit, diversification benefits from exposure to consumer risk and the floating rate nature. More broadly, we see ABS as a versatile asset class that can play a wide range of roles in client portfolios ranging from allocations in collateral buckets to growth portfolios. BlackRock’s Senior Securitised fund is a good example of our focus, and we are happy to have engaged with BlackRock from the initial design stage.”

Nick Cooney, Senior Investment Consultant & Partner, Lane Clark & Peacock, says: “Securitised debt continues to be a core asset for institutional investors, so it is encouraging to see BlackRock embrace feedback and build a solution which closes a gap in its fund range. This development is particularly timely given the current strong demand from those seeking liquid investment strategies that offer favourable risk-reward characteristics.”

BSSF is actively managed and has an unconstrained investment style (it will not take a benchmark index into account when selecting the Fund’s investments) the three month SONIA compounded in arrears should be used by investors to compare the performance of the fund. It is an Irish domiciled Alternative Investment Fund and will invest in both primary and secondary offerings of securitised assets. The Fund adopts the following credit rating, geographical and sector constraints when managing investment positions:

Credit rating constraints: BSSF is focused on the higher quality portion of the capital structure – with a minimum exposure of 75 per cent to AAA assets and a minimum rating of AA-.

Geographical constraints: BSSF is predominately focused on European and UK assets but can also invest up to 25 per cent in the US (and other regions).

Sector constraints: BSSF will have a minimum exposure of 65 per cent to ABS and a maximum exposure of 35 per cent to CLOs.

The fund will be classified under the EU’s Sustainable Finance Disclosure Regulation (SFDR) as Article 8, with ESG factors acting as a core component of the team’s securitisation analysis, and with a skew towards issuance with positive social and / or environmental impact.

The fund will be co-managed by Ring Capital, a private equity firm dedicated to supporting startups that impact our world through responsible commitments and actions. This initiative demonstrates EDHEC and Ring Capital’s shared ambition to support entrepreneurial projects that drive social and environmental change. 

EDHEC writes that it was among the first European business schools to focus on entrepreneurship, opening its first startup incubator in 2010. Today, EDHEC’s incubators launch 70 startups annually, more than half focusing on solving social and environmental challenges. As part of its ongoing commitment to responsible entrepreneurship, including introducing a unique Responsible by Design methodology for incubated companies, EDHEC is taking the next step and joining forces with Ring Capital to create GENERATIONS Powered by EDHEC. This seed investment fund will support a new generation of entrepreneurs passionate about combining financial performance and social commitment, the firm says.

A partnership with impact

EDHEC chose Ring Capital to manage the GENERATIONS Powered by EDHEC fund because they represent the standard in impact investing. Ring Capital will contribute its expertise to identify, finance, and support entrepreneurs seeking innovative solutions to the world’s most pressing challenges. EDHEC will also benefit from Ring Capital’s impressive track record in identifying impact projects and its industry-leading operational support services. When combined with the strength of EDHEC’s network, the GENERATIONS Powered by EDHEC fund offers a unique value proposition for impact entrepreneurs in their seed phase.

Research and entrepreneurship to benefit future generations

This new fund will be financed with up to 20 million Euros from the EDHEC Business School Foundation (EDHEC sold Scientific Beta in January 2020) and school alumni. The fund’s creation illustrates the strength of EDHEC’s unique model, “Research for Business.” 

“In the face of pressing societal challenges, we are proud to invest the proceeds of our high-value-added research in supporting impact projects,” says Emmanuel Métais, Dean of EDHEC Business School. “Encouraging entrepreneurship is part of our DNA. By creating GENERATIONS Powered by EDHEC, we aim to support entrepreneurs who put all their energy into creating a sustainable transformation of the economy and society. In doing so, we create a virtuous circle: the value of our research allows us to nourish impact entrepreneurship, which will finance new solidarity projects for the EDHEC Foundation 

tomorrow. We are very pleased to be associated with Ring Capital, whose financial expertise and commitment to society are widely recognised.”

To identify, finance and accompany startup companies, GENERATIONS Powered by EDHEC will have a dedicated team, including two investors from Ring Capital: Gaspard Martin (EDHEC 2018, ex-MAIF Avenir) and Sibylle Behaghel (EDHEC 2020, ex-50 Partners). The team will also include three experienced EDHEC venture partners: Sandra Armstrong (EDHEC 1993), Jean-François Drweski (EDHEC 2004), and Didier Kuhn (EDHEC 1992).

A unique investment model

GENERATIONS Powered by EDHEC writes that it is a unique fund mobilising multiple generations – alumni, entrepreneurs, and investors – behind a common goal: transforming the entrepreneurial ecosystem to tackle significant societal challenges.

The fund will be open to EDHEC graduates and entrepreneurs who want to positively impact the global economy and society. Ring Capital will select projects based on their potential to innovate in environmental transition, health and well-being, responsible consumption, as well as equity and inclusion.

“We are witnessing the emergence of a new generation of entrepreneurs who are keen to propose solutions to the social and environmental challenges of our time,” says Ring Capital co-founder Nicolas Celier. “They are innovating and finding business models that enable them to align financial performance with impact performance. To achieve this, they must be supported by investors who understand the challenges. This is a unique opportunity for impact investors to identify and support these entrepreneurs, helping them to solve the biggest challenges facing the next generation. We’re delighted to have been chosen by EDHEC, a school that stands out for its dynamism, commitment, and values to put our experience and ecosystem to work on this mission.”

A community dedicated to positive change

The GENERATIONS Powered by EDHEC fund will benefit from EDHEC’s vast entrepreneurial ecosystem, which offers an impressive reservoir of knowledge and skills training in responsible entrepreneurship and innovation. EDHEC offers research in global entrepreneurship, degree programmes such as the MSc in Entrepreneurship and Innovation, entrepreneurial mentoring, workshops for key startup team members, and a network of experts that includes many EDHEC alumni and partners dedicated to environmental transition. In addition, entrepreneurs can immediately access the Responsible by Design methodology by EDHEC Entrepreneurs to build companies that meet sustainable economic, social, and environmental performance criteria from Day 1. 

With this new fund, EDHEC aims to promote a “regenerative” business model that will positively impact society and the environment. 

Mirroring the firm’s strategies available to US investors, they are the Matthews Emerging Markets Equity Fund (ISIN LU2651608080), Emerging Markets ex China Equity Fund (ISIN LU2651608247), Emerging Markets Discovery Fund (ISIN LU2651608676). All three funds are categorised as Article 8 under SFDR. 

Managed by Lead Portfolio Managers John Paul Lech and Alex Zarechnak, with support from co-managers Andrew Mattock and Peeyush Mittal, the Matthews Emerging Markets Equity Fund uses a fundamental, bottom-up investment approach to build a core, quality-growth all-cap portfolio of 30 to 70 companies.  The investment team typically looks for companies that have higher growth metrics, as well as higher quality metrics, than the broader market with a focus on firms that can serve the growing needs of domestic consumers within their market.  

The Matthews Emerging Markets ex China Equity Fund is a concentrated all-cap portfolio of 30 to 70 stocks that provides investors with the ability to separate China from their core emerging markets allocation, either to avoid exposure or have more control using a dedicated China strategy. The fund employs the same bottom-up stock-picking strategy as the Matthews Emerging Markets Fund and is also managed by the same lead portfolio managers with support from co-manager Peeyush Mittal. 

The Matthews Emerging Markets Discovery Fund provides investors with the ability to complement their current emerging market allocation with a portfolio that invests in small companies that often have more innovative and entrepreneurial business models. The Fund invests in 40 to 80 small companies across the Emerging Markets, typically early in their lifecycle, holding them as they capitalize on structural growth trends in large addressable markets. The fund is managed by Lead Portfolio Manager Vivek Tanneeru with support from co-managers Jeremy Sutch and Alex Zarechnak. 

Cooper Abbott, CEO of Matthews Asia, says: “In our discussions with institutions and wealth managers, a growing number are looking to build customised exposures to Emerging Markets and have greater control over a core allocation. Matthews’ launch of these Emerging Market Funds gives the power of choice to sophisticated investors, allowing us to deepen partnerships with clients in Europe and Asia and for them to leverage our firm’s capabilities to construct highly distinct, actively-managed portfolios.” 

Neil Steedman, Head of International Distribution, says: “Emerging markets can offer investors the biggest potential for long-term growth over many other assets classes. With a combination of large populations, higher economic growth, rising wages and productivity, a shift toward sophisticated services and consumption and deepening capital markets, they will continue to create new and attractive investment opportunities for investors. We are pleased to offer our proven approach to stock-picking and portfolio construction to investors who seek more distinct emerging markets exposures.” 

China’s RMB26 trillion (USD3.6 trillion) mutual fund market continues to attract global asset managers, and eight wholly owned foreign fund firms have been set up in the market to date. Backed by professional research teams, as well as extensive global investment experience, foreign managers can provide innovative solutions to meet the diverse needs of investors, the firm says. Foreign managers can use these strengths in areas that are relatively new to China, such as pension funds, index funds, sustainability-themed funds, and Qualified Domestic Institutional Investor (QDII) funds. They can also rely on their expertise to provide investors with more personalised and scientific programs, such as quantitative strategies and robo-adviser platforms. 

Foreign fund managers with established global brands have no problem attracting investors’ attention. However, no matter how strong their financials, investment philosophies, and risk control systems are, global managers in China still need to provide excellent performance and service. Many local fund managers have started to refine their investment processes in recent years, and they are increasingly focused on the stability of investment processes and portfolio risk management, Cerulli says. 

Most foreign fund managers have entered the Chinese market through joint ventures, with only a few starting their activities in the form of solely foreign-owned or foreign-controlled businesses in the past three years. This means they tend to have a smaller domestic customer base and relatively weak fund distribution channels compared to local companies. Foreign managers that are lagging in traditional distribution partnerships with banks may find it expedient to partner with other distributors. Cerulli believes that enhancing cooperation with top securities firms focused on wealth management and online platforms will bring about opportunities for growth.  

Foreign fund managers also face fierce competition from local firms in attracting and retaining talent. Still, they have managed to recruit star managers who are familiar with the domestic capital market and possess local investment experience. Local talent who choose to join foreign managers tend to do so for culture reasons, as the work pressure is generally less intense in foreign firms, and they provide more attractive benefits and better work-life balance, Cerulli says. 

“The entry of global fund houses has intensified competition in China’s asset management industry, but offers opportunities for the entire industry to develop,” says Joanne Peng, research analyst with Cerulli Associates. “For foreign mutual fund managers to succeed in the market, they will have to work on their ability to achieve stable returns and control the risks of their products.”

The fund will invest in a portfolio of issuers that have an A1, P1 or F1 rating, or long term equivalent, and are demonstrably better at addressing ESG risks than other issuers in the investable universe. This will be achieved by applying a robust ESG scoring system and relative ESG filters that are appropriate for the money market investable universe. The fund will enable institutional investors – including large corporates, pension funds, insurers and others – to focus their cash investments in a solution that helps them meet their own sustainability objectives.

Issuer engagement will also be a key component of the fund’s approach. To meet sustainability goals, HSBC AM will be encouraging issuers to address identified shortcomings in how they manage ESG risks. This ensures that companies are aware that their ESG performance is factored into decisions on whether their short term debt issuance is eligible to be purchased by the fund. By doing so, HSBC AM aims to increase the focus on better management of ESG risks and achieve more sustainable outcomes.
 
In addition to the investment process focused on addressing ESG risks and opportunities, the fund will look to evolve to include other features to provide further contribution to investors’ sustainability objectives.
 
Paul Griffiths, Global Head Institutional Business, HSBC AM, says: “The launch of our first ESG MMF is another innovative example of how we are providing our clients with opportunities that enable the transition to a more sustainable world.”
 
Jonathan Curry, Global Liquidity & Americas CIO, HSBC AM, adds: “We are committed to delivering market-leading solutions to meet the responsible investment ambitions of our clients.

“For corporate treasurers, the use of a money market fund that credibly applies ESG to its investment process can contribute to the company’s overall sustainability objectives. For individual or institutional investors with a specific focus on sustainable investing, cash no longer needs to be an afterthought in a sustainably invested portfolio.”

The performance has been recognised with a five-star Morningstar Rating, with MAN WING awarded a AAA Citywire Rating.
 
As lead manager on the strategy, Man Wing has generated alpha by using his Asia expertise to seek out attractive valuations and the potential for growth in companies across the region. The wide-ranging mandate has seen portfolio exposure to offshore China, Taiwan, Korea, Hong Kong, India, Singapore, Indonesia, and Thailand.
 
The Fund targets best-in-class companies in “growth-like” areas of the market, such as information technology and communications, as well as more traditional sectors such as industrials and manufacturing, which are benefitting from the recovery and re-opening of the global economy in the wake of the Covid pandemic.
 
Chung says: “We are seeing a number of players with strong growth prospects in the region leading globally. Some sectors in the region also continue to benefit from the “demographic dividend”, in which areas such as consumption remain underpenetrated and still exhibit plenty of growth potential. That is why from a long-term investor’s point of view, the Asia ex-Japan market remains full of opportunities across different segments of the market.
 
“We employ an “All Market, All Capitalisation, All Style” approach, as we believe better risk-adjusted returns can be generated not by betting on the basis of geography, capitalisation or style, but by really focusing on the underlying corporate fundamentals to identify good stocks in this huge market.”
 
Hendrik von Ripperda-Cosyn, Managing Director, European Business at Value Partners, adds: “The ratings recognition on qualitative factors of the Fund and Man Wing illustrate that not only have investors benefitted from exposure to an exciting asset class, but that Value Partners has provided excellent skill in delivering risk-adjusted return. It is important to note that while we are pleased at the three-year returns provided, we harbour a long-term view of the Asia ex-Japan region and the ongoing investment opportunities.”

This strong performance continued the recovery that started in the second half of the previous financial year.

The portfolio outperformed significantly with a total return of 16.2 per cent, compared to a return of 12.6 per cent for the FTSE All-Share Index. Most of the outperformance was driven by individual stock selection, although there was some benefit from industry selection, with a low exposure to the weak personal care sector helping relative performance. Many of the top ten positive contributors were companies that benefit from economic recovery, rising financial markets and increasing interest rate expectations.

For the first half of this financial year the dividend has been maintained at a consistent level with 2020, with a total distribution declared of 13.6p. The board has declared a second quarterly dividend of 6.8p per ordinary share, payable on 11 November 2021 to shareholders on the register at close of business on 8 October 2021

As noted in the latest annual report, the board remains committed to the payment of a progressive dividend to shareholders, having now raised the dividend for 39 consecutive years and being one of the AIC’s ‘Dividend Heroes’, an elite group of investment trust companies that have increased their dividends each year for 20 years or more.
 
The board authorised earlier this year for up to 10 per cent of the portfolio to be invested in overseas listed securities. The aims are to allow the manager more flexibility to diversify the portfolio, to seek new diverse sources of income and to access sectors where there are limited or no opportunities in the UK market. At the end of the reporting period the portfolio had around 4 per cent invested in overseas shares and in particular this flexibility has allowed access to the re-insurance sector.
  
Companies have been returning to paying dividends, with many taking the opportunity to rebase payments to a lower starting point. The portfolio revenue earnings per share (EPS) for the six months were up 49 per cent over the corresponding period last year to 13.3p (2020: 8.9p), however still behind the (pre-Covid) 2019 figure of 16.1p.

Against this backdrop the trust’s revenue reserves continue to provide a practical buffer to allow the flexibility to draw on them to support our key objective of paying a high and rising dividend to shareholders. As at 31 July 2021 revenue reserves were 17.6p per share (2020: 22.6p).

Colin Clark, Chairman, says: “The world remains a strange place. Some days one might be forgiven for thinking we were ‘back to normal’ whilst other times we are issued stark reminders of the ongoing pandemic which we are very much still struggling to get to grips with on a global scale. Economic recovery, whilst positive, is also bringing with it the spectre of rising inflation as governments throw the weight of policy behind supporting their economies and input prices rise. Markets seem to be acting in a reasonably stoic manner though and for some time now the question around recovery seems to have been one of trajectory and timescale rather than ‘if’.

“As manager Simon Gergel notes that the UK stock market remains considerably cheaper than major global peers, even with the removal of political and Brexit uncertainty that has caused downward pressure over the past five years or so. In addition, there remains further apparently indiscriminate pressure on any company not viewed as high growth by the market. Ultimately this all spells opportunity for skilled stock pickers and should provide a good hunting ground for the investment manager to maintain a portfolio which can meet Merchants’ long term objectives of capital growth plus a high and rising income for investors.”

Simon Gergel, Portfolio Manager, says: “At the end of July, the UK stock market was almost back at the level it reached before the pandemic. However, the UK remains one of the cheapest major countries, having underperformed most European and US markets significantly since the Brexit referendum in 2016. Furthermore, there remains a high level of dispersion, with many shares trading on very modest valuations. As the pandemic has only had a limited impact on the longer-term prospects for most industries, this set of circumstances has created interesting investment opportunities. The low valuations of many fundamentally sound companies in the UK have not gone unnoticed. There has been a large number of takeover bids in the UK this year, typically from private equity investors or other corporations, and often at substantial premiums to the prevailing share price. If the stock market fails to fairly price companies, we can expect more of these bid approaches.

“The high dispersion of UK company valuations has created a good environment for stock picking. Merchants holds a portfolio of fundamentally sound businesses, trading on attractive valuations, where we see supportive structural trends or other themes. The portfolio is diversified across industries, geographic end markets and degrees of economic sensitivity. We believe that this portfolio is capable of delivering a level of income and long-term capital growth in line with Merchants’ objectives.”

Since launching in August 2013, the fund has attracted assets from private, professional and institutional investors. It has returned 118.8 per cent (17.0 per cent pa) over the last five years, compared to the MSCI World’s 97.8 per cent (14.6 per cent pa) (USD terms).
 
Fund Manager Gerrit Smit manages a concentrated, high conviction portfolio of 28 businesses that are chosen for their sustainable growth potential, strong management team, strategic competitive edge and value. The portfolio has very low turnover: over the past 12 months Gerrit has only sold two positions, with the fund turnover well below 10 per cent. Current investments include some of the world’s best known companies such as Amazon, PayPal, Microsoft, Nike, Adobe and Estée Lauder.
                                                 
Commenting on the current market environment, Smit says: “The global fundamental economic recovery for 2021 is well underway, coming off the low base of 2020. We believe we are now into a new positive global economic cycle, well supported by the successful vaccine roll out programmes.

“Some investors are challenged with perceptions of high valuations. They often underestimate the value of sustainable growth and get overwhelmed by current valuation multiples. The best opportunities lie in strategic investing with an eye on the horizon for long-term compounded growth, combined with an improving short-term outlook.”  

Andrew Clarke, Group Head of Business Development, says: “In under two years, our Global Best Ideas Equity Fund has doubled in size to exceed USD2 billion. The investment philosophy that underpins the Fund’s strategy, (ie that a good business remains a good business irrespective of short-term share price volatility), clearly resonates with investors.

“We are excited by the Fund’s growth potential and look forward to raise the Fund’s profile further amongst wholesale investors this year.”
 
On the continuing impact of Covid-19, Smit adds: “PayPal and Amazon (and many others’) futures are in the process of arriving two or more years early, without all the usual necessary investment required to attract all those new clients. Their future profitability therefore also arrives earlier, and their share prices have to reflect that. We believe their future growth trajectory has been enhanced by Covid-19.”
 
“Whilst the high street is structurally damaged, those businesses that have developed their online capabilities well are in the process of taking permanent market share. They should also enjoy better margins, with direct sales replacing those through wholesalers and retailers.”