In this Green Dream video interview, Otto Van Hemert, director of core strategies at Man AHL, discusses the TargetClimate Fund, engagement and how more and more ESG data will become available to investors.
Watch the full video interview above and read the transcript below.
NK: Hello and welcome to this Green Dream video. I’m Natalie Kenway and today I’m joined by Otto from Man AHL. Thank you so much for joining us today. Can you tell us a bit about what you do and the new TargetClimate Fund?
OVH: Absolutely. Thanks for having me. The TargetClimate Fund is a fund where we have a climate focus, we pick securities that are aligned with a transition to a low carbon economy. It’s also a fund where we care a lot about the returns we generate. We trade the different asset classes that may perform in different economic environments, and we apply portfolio construction and risk management techniques in order to get a more balanced returns stream.
NK: Okay. Tell us about how the fund works. It’s a systematic process – what exactly does that do?
See also: – Man Group launches climate multi-asset fund
OVH: It’s a systematic programme in a sense that it’s all rules-based. On a day-to-day basis we apply to the rules we came up with. It trades across asset classes and it trades single-name stocks, corporate bonds, including many green bonds, government bonds, as well as commodities.
We trade four asset classes in a risk-controlled manner. Within each of those asset classes, we pick the securities we deem climate focused.
NK: What’s the criteria? What exactly are you looking for?
OVH: In order to be deemed climate focused? We pull a lot of data and onboard the data. We clean the data, we digest the data, processed the data.
And based on all of these data sources on emissions and on social matters and all kind of different ESG metrics based on all that data, we select the securities that we think are sustainable, and they are also sustainable from a regulatory point of view. We’re an Article 9 fund and there are very strict rules for that.
NK: Why did you think there was a gap in the market for this type of product? Where do you think it was set in client portfolios?
OVH: There’s a big demand for climate-focused funds. People really want to do something about the climate issue and they’re looking to invest in a way that is aligned with that desire as well as still get the good returns. There’s a lot of demand. There’s not much supply.
It’s only more recently that the right data sources have come out, and it’s only more recently that asset managers have started to focus on this. We believe we’re one of the first to have a multi-asset systematic fund that focuses on climate trading.
NK: Can you talk a bit about how the fund is positioned now? Which areas would you say it is more exposed to?
OVH: A key feature of the fund is that it has active risk management. We trade the asset classes I mentioned, we have active risk management around that. At this very moment, the risk overlays are not active, so it’s been calmer in the markets. But if you look at last year when we just started the fund, for example, the bond positions were really taken down as inflation worries were bubbling up, bonds, bond prices tended to go down and we risk controlled those positions.
NK: Do you have an approach to engagement with the companies that are invested in portfolio?
OVH: Absolutely. First of all, we mainly hold securities that we deem good in some sense. So there’s less need to engage with the management of the companies for which we hold the stock or the corporate bonds. But still, we do try to use our vote wisely.
We typically aggregate this up across Man Group so it’s not just HL or just this TargetClimate Fund. We have a dedicated team doing this. They are particularly focused on issues around climate, around emissions, human rights as well. So it’s really the voting you get across all of Man Group aggregated up and used to influence company management.
NK: What would you say is your outlook for sustainable investing as a whole?
OVH: Yes, mentioned. I think there’s a big demand for it. I think there’s not that many funds yet that have a multi-asset approach, which we believe is a sensible approach if you care about the returns as well. If you want a balanced return, you want to hold different asset classes that perform at different times.
I think the outlook is that there’s just large demand, limited supply. And I think the other development we’ll see is that more and more data will come out. It’s not in all areas as refined as one would hope. There’s still a lot of work going on and we and others will make changes when the new data becomes available.
NK: Okay, great. And something we always end these video interviews with is to ask you about your personal contribution to a low carbon world. What do you do?
OVH: I’m Dutch, so I like to bike around. And I also when I bring my kids to places, I usually bike in a big cargo bike. I go across the streets. Other than that, I travel back and forth between Amsterdam and London regularly, but usually take the train and I’ve put some solar panels on my roof as well.
NK: Well, thank you for coming in to see us. Great to speak to you today.