MitonOptimal’s James Sullivan, UK managing director and fund manager, has introduced responsibly invested funds to the group’s mainstream multi-asset portfolios through active and passive positions, with the view this exposure will grow further
The firm runs a Risk Profiled Model Portfolio Service (MPS) as well as an SRI & Ethical MPS, with little overlap between the two.
However, since MitonOptimal’s acquisition of Minerva in 2017 when, Paul Warner moved across with some 25 years’ experience in investing responsibly, ESG positions have gradually been added to the mainstream MPS.
Sullivan explained: “Paul’s involvement in our investment committee has led to a more responsible way of investing, initially by osmosis, then more so based on evidence and growth characteristics of companies within that space.
“The consequence of this is we now have a number of positions in this space that have a focus on renewable energy and real assets.”
Sullivan added that exposure to responsible vehicles is likely to “grow as prices and valuations permit us to get more traction in this space”.
Warner founded Minerva in 1991 and began running discretionary SRI Portfolios for clients in 1994. He now works with his daughter Sarah Warner on the responsible investments at MitonOptimal.
As a result of his research, Sullivan has added 12-13% exposure to responsible investment vehicles to the multi-asset funds he runs by taking positions in Gresham House, the Schroder ISF Global Energy Transition fund and a number of passives.
Sullivan said: “Gresham House, one of the oldest names on the London Stock Exchange, is a specialist asset management company with a focus on real assets, markedly but not limited to, forestry and new energy. Assets under management neared £2.5bn last summer, a remarkable number given the management buy-in was only as recently as 2015. This acted as a catalyst to pivot the company in a different, more alternative and responsible direction.
“Revenues are healthy, and the company is now witnessing the benefits of operational gearing passing through to the bottom line. Despite harbouring lofty growth ambitions, the company introduced its maiden dividend in 2019, thus extending its appeal to a wider shareholder base. The demand for ‘real assets’ is on the up, and Gresham House is placed well to capture this and then some. Real asset investing lends itself to institutional investors who are capable of locking up capital for a number of years, and therefore can be stickier than that of which we see in retail funds.”
The Schroder ISF Global Energy Transition fund is run by the group’s head of commodities Mark Lacey and analysts Alex Monk and Felix Odey.
Sullivan commented: “Its exposures could perhaps be seen as the foundation blocks of the clean energy pyramid. The fund is comprised of companies at the forefront of clean energy generation, storage and distribution (among other areas).
“As an example, Daqo New Energy Corp, one of the fund’s larger weightings, processes polysilicon – one of the key components within solar panels. As we see greater demand for wind turbines and solar panels, we believe the fund well placed to add value to our portfolios.”
Passive ESG investments in the MPS also include iShares Water ETF, following research carried out on water-positive investments by Sarah Warner, and the Nikkei 400 index which was established by Japan to help overcome bad habits in corporates and screens out companies that fall short of the criteria.