Traditionally, Asset Allocation has meant choosing between a rigid set of definitions of different Asset Classes for investments: Equities, Bonds, Property, Cash, or geographic allocation between different currency blocks. The determinants of allocation between these categories often boil down to little more than interest rate expectations. At WHEB we believe there is likely to be so much change to the landscape for the economy and wider society over the coming decades, that there is a need for another dimension to the allocation decision – namely to understand which part of the economy an investment portfolio should be exposed to.
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Get direct access to WHEB Asset Management’s sector expertise by reading our blog. Read commentary and opinion pieces on the environmental and social themes that make up the IM WHEB Sustainability Fund, as well as the wider issues relating to the topic of sustainability investing.
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Category : WHEB Asset Management |
Book Review: “Slow Finance” by Gervais Williams (Bloomsbury 2011)
Gervais Williams has been a successful UK small-cap fund manager for over 25 years. He has written this book in response to the global financial crisis and in order to advocate what he calls: “Slow Finance.” He starts by providing some helpful perspective on the financial crisis and its causes. He explains that over-the-counter derivative contracts now exceed $14tn – a vast number, way in excess of the US debt ceiling. He talks about the credit boom and the high levels of individual and government indebtedness. He then uses the food industry as an analogy and describes the backlash against ‘fast food’ with the emergence of the ‘Slow Food’ movement. (p35) This ‘Slow’ idea has extended more generally to advocates of Slow Travel, Slow Parenting, Slow Fashion, and generally of slowing down. Williams picks up on this trend to propose Slow Finance. He describes the principles of Slow Finance as: avoiding complex instruments and high levels of debt, going for companies with careful sustained business plans, preferring small companies to large ones, preferring businesses which demonstrably benefit the national community, and actively picking stocks rather than following a benchmark. (p38-39) Much of the rest of the book is then taken with defending a value based style of investing in small-cap companies which pay dividends, with extensive reference to the various studies of Dimpson and Marsh, and Benjamin Graham’s classic work “The Intelligent Investor”.
Yesterday the Carbon Tracker Initiative (‘CTI’) launched its second report, with a well-attended event at Bloomsberg’s offices. “Unburnable Carbon 2013: Wasted capital and stranded assets” picks up where CTI’s original 2011 report left off. The premise is simple: we can’t burn all of the fossil fuel assets on the balance sheets of fossil fuel companies, and not risk catastrophic climate change.
Back in 2009, along with tens of thousands of others, I joined the Climate March as it snaked through Central London demonstrating support for a strong global deal on climate change at the Copenhagen Summit. What was surprising to me on that march was the level of antipathy directed towards the European Union’s Emission Trading Scheme (ETS). Protestors from many of the UK’s leading environmental groups were decked out in top hats and tails parodying Conservative politicians and ‘fat cat’ bankers who they believed were exploiting the markets to make money while doing little to reduce carbon emissions. Ironically, on the 16th April this year the European Parliament voted against a proposal to shore-up the European carbon markets and the blame was being squarely levelled at the bowler-hatted Tories that the protestors were lampooning.
Are we finally seeing consolidation in the solar sector? The sector has been suffering from oversupply for a long time but the market forces of supply and demand so far have only led to sharp price declines throughout the supply chain. The overcapacity issue persists due to the availability of cheap loans and preferential government policies in China. Finally, here comes the news which looks like the beginning of industry consolidation. Suntech’s Wuxi subsidiary declared bankruptcy on Wednesday, following its default on a $541 million convertible bond.
I attended a talk by Al Gore earlier this week hosted by ShareAction (which recently changed its name from Fair Pensions). To my surprise, he described it as: “the most important talk I have ever given.” His mission these days is to promote a shift to a more sustainable capitalism – clearly a subject he is passionate about.
Today, Tuesday the 12th March, is Ownership Day, a new initiative from UK Sustainable Investment and Finance (UKSIF) to raise awareness of the benefits of active ownership strategies in investment management. We are supporters of Ownership Day, and hope it is successful in encouraging asset owners, including pension fund members and retail investors to ask their trustees, financial advisers and fund managers whether their portfolio is being actively managed.
When you run electric current through a tungsten filament in an incandescent light-bulb, you waste roughly nine times the energy transformed into light, as heat. And those old incandescent light-bulbs always need changing: each one lasts around three months at average usage.
It is not often that one’s first meeting of the morning starts with an exquisite rendering of a 19th Century Danish hymn by a quartet of professional musicians. The singing along with a crisp, cloudless but decidedly chilly Copenhagen morning served to kick-start a day long discussion of how Novo Nordisk, the Danish pharmaceutical company , should go about creating ‘sustainable value’.
There is some confusion these days about what SRI actually stands for. It used to mean Socially Responsible Investment, but then people decided that the ‘social’ bit was rather misleading, particularly when many funds in the sector were focused on sustainability, so it was changed to Sustainable and Responsible Investment. However, an article in February’s edition of the Observer Food Monthly provided yet another key to the acronym: In latest agricultural thinking, SRI stands for a new method of growing crops called System of Root Intensification.
The horse meat crisis continues to escalate since last month when Irish food inspectors announced they had found horsemeat in some burgers stocked by UK supermarket chains including Tesco. As it turned out, it was not only the UK and Ireland which had the problem. Germany, Switzerland, Belgium and the Netherlands are the latest countries to confirm the discovery of horse meat in frozen meals, and millions of processed meat products have been withdrawn from supermarket shelves across the EU.
Getting excited about the mass adoption of Light Emitting Diodes (LEDs) seemed a perfectly reasonable response to projections for the market in 2013 until a colleague pointed out that he could think of little else that would as surely send him to sleep. The comment reminded me of the quote from Scotland’s national bard Robert Burns. In the final verse of his ode ‘To a Louse’ he appeals for some power to give us the gift ‘to see ourselves as others see us’. It may indeed be that my colleague sees me as an energy efficiency nerd…
It is widely agreed that asset allocation accounts for the vast bulk of returns for most global equity funds. Within asset allocation, it is often regional bets that either deliberately or inadvertently end up driving performance. In my past experience as an Investment Trust analyst I saw this first hand as I met many managers of global funds who came to see me to explain their performance. Outperforming through stock selection in Japan was never enough to mitigate the effects of being overweight Japan whilst the market was falling in the early 1990’s.
On 1 February 2013, the IM WHEB Sustainability Fund will be available on the Cofunds Retail Platform.
It is often difficult to connect what seems like an endless stream of UN-sponsored multilateral environmental talks with actual change on the ground – let alone investable ideas for an asset manager. But look closely, and those opportunities are there.
It always strikes me as ironic that during the festive season, when we want to look and feel our best the dreaded norovirus as well as assorted cases of colds and stomach bugs strike. Over half of my team have been struck down in the last few weeks.
What is happening to the world of ethical funds? Over the past 8 years or so, ethical funds have been one of the few areas of growth in the world of equities investment almost trebling funds under management. Yet, in the last twelve months, several of the largest incumbent managers have made radical cuts to the resources they devote to these businesses.
Another year, another round of climate talks. This time – the eighteenth – the talks were in Doha and concluded with little fanfare on the 8th December.
Of all the issues that could have caused division in the UK’s Coalition Government, support for the deployment of onshore wind was not originally a leading contender. Indeed, in the early days of the Coalition, the environmental agenda seemed to be one of few areas of genuinely common ground between the Liberal Democrats and their Conservatives in what the Prime Minister anticipated would be the ‘greenest government ever’.
