SWITZERLAND/LUXEMBOURG- Pictet’s fund management arm has announced the launch of a new socially responsible fund, known as Sustainable Equities Europe.
Says Christoph Butz, sustainability expert at Pictet: “The sustainable equities fund offers strict risk control. We first look at the risk characteristics of stocks, then choose within this selection the most socially responsible investments.
“It is the only product on the market which defines an acceptable tracking error and then maximises sustainability in that order. Most SRI funds instead choose sustainability over risk, and then end up having to sell stock when they perform badly and replace them with less socially responsible assets.”
Pictet will use what it calls its sustainable value chain (PSVC) to pick around 80 European stocks for the portfolio. The majority of MSCI Europe companies are analysed and given a PSVC rating – an indication of how effective a company is at creating sustainable added value. Stocks from those companies that rank highest in their sector will be picked
In terms of returns, Pictet believes companies that are capable of combining their social and environmental activities with a successful business model can expect to achieve higher than average growth.
Due to its complexity, Butz believes institutional investors will find the fund more appealing than individual investors, but the product is to be marketed to both sectors.
Says Christoph Schweizer, product manager: “ it has been a nasty period in the equity markets. The stock market downturn has left investors looking for a new approach. The sustainable equities fund should offer that diversification to investors.”
The fund is listed in Luxembourg it is estimated it will have around e100m in assets under management after a year. Lauren Nguien will manage the fund from Geneva.
The rewards of investing in socially responsible funds have recently been discussed, as many investors do not feel the returns to be high enough to compensate the risk. In July Commerzbank published research claiming that socially responsible investments incur higher risk than traditional portfolios as very few managers use SRI benchmark.