Aberdeen Standard Investments (ASI) recently renamed and restructured its Aberdeen Standard Australian Equities Fund into the Aberdeen Standard Focused Sustainable Australian Equity Fund - a concentrated all-cap fund that invests in 20 to 35 ASX-listed companies identified by ASI as sustainable leaders and improvers in managing ESG risks and opportunities. ASI managing director Australia, Brett Jollie, and head of Australian equities, Michelle Lopez, discussed the changes with Industry Moves and why it was just 'the right thing to do'.
Brett Jollie: It was fairly straightforward, it was a client-driven decision. Our investors are seeking to align their financial futures with their personal values.
We believe ESG factors are financially material and lead to better risk return outcomes for investors. Companies incorporating ESG are better long-term custodians of our clients' capital and it's very important to us. By putting ESG factors at the heart of our investment process we believe we can generate better outcomes for our clients.
Michelle Lopez: First and foremost, it was the client demand but we've actually seen a massive shift in the last 12 months, and I'm not sure if this was a structural change that COVID-19 accelerated (a terminology we're hearing a lot of these days).
I think institutional is well ahead, nowhere near ahead as what Europe and the US is, but still institutional is ahead of wholesale but the conversations that we've been having on the wholesale front have really shifted in the last 12 months so that client demand is a lot more prominent today than what it was 12 months ago.
Brett: It's an incredibly competitive universe the Australian equity universe. We felt that this provided us with the best opportunity to take to market immediately a strategy which would benefit our clients.
Michelle: There are three key factors of differentiation.
Michelle: It will be one of. So, we still have the small cap portfolio which is a flagship for us as well and the ex 20 which is a mid-cap so this will be the third.
Michelle: We did. As you can imagine with a large cap fund, we owned the likes of BHP, Rio Tinto, Woodside, Aristocrat. Those names had to be sold out and then, because it is now an all caps, we found the best within small caps and mid-caps and put those into this portfolio as well. And when I say the best, it's taking that SRI lens [to find] which are the leaders, which are the ones we identified as the improvers, because again that's where we feel that companies can get a rerate.
Brett: We've had quite positive feedback. Because there hasn't been a huge change, the benchmark is the same, the universe has broadened, it's a larger universe so it adds to the alpha potential and it aligns with most people's values.
Michelle: I think there is now an understanding that this doesn't come at the expense of returns. In fact, you're able to deliver a better risk return for clients, whereas previously there was a bit of a trade-off conversation being had. I find with my conversations with clients that that's no longer the case. And for me that's a clear indication that the tide has turned on this.
Brett: We firmly believe that our engagement and active management unlocks the alpha potential within high quality companies that are well positioned to lead and benefit from the transition to a sustainable world. So, we can provide ESG beta as well as genuine ESG alpha.
And we also believe it's the right thing to do while achieving our clients' long term financial gaols.