Developments and commentary in and around the ESG investment space.

Boston-based Cerulli’s latest look at the appetite for themed equity products shows demand continuing to surge through 2021.

Sector-themed investments more than tripled in 2020 pulling in €89 billion ($108 billion) in Europe, with total AuM topping €500 billion by the end of October. Strongest demand was seen in funds with a water, biotechnology and technology focus. Until October, technology-related themes were out in front, attracting a combined €28 billion or 32 per cent of net inflows, followed by healthcare at 15 per cent, and renewable energy/climate change at 12 per cent, according to Cerulli’s data.

“Technology themes, which include artificial intelligence, cybersecurity, and 5G networks, are expected to continue to attract high demand, in part due to the success of mass remote working,” said Fabrizio Zumbo, associate director for European asset and wealth management research at Cerulli, who says this is likely to continue post the pandemic.

Counter to those anticipating a sharp reversal in fortunes for technology stocks as investors rotate into recovering sectors, eight in 10 managers surveyed by Cerulli said that they expect significant increased demand for technology-themed ETFs in the next 12 to 18 months.

Besides managers becoming more comfortable using thematic ETFs, either to diversify or fulfill clients’ investment objectives, European asset managers interviewed by Cerulli said they also find thematic funds easier to sell to clients because they come with compelling narratives that make the products easier to understand.

The consultancy expects that the number of US financial advisors adopting asset allocation models will continue to rise in 2021. “Advisors are looking to outsource portfolio management in order to spend more time on business development and providing clients with more personalised wealth management services,” the group said.

Ninety One
Ninety One, previously known as Investec Asset Management, has won a regulatory green light for its Global Environment Fund in Singapore. The fund is open to retail investors.

The fund holds companies which focus on sectors that reduce or eliminate carbon emissions, tapping into a common theme of investment aimed at curbing global warming. 

All the companies in the fund are exposed to at least one of the three themes - renewable energy (such as solar energy), electrification (for example, electric vehicles) and resource efficiency (such as energy-saving appliances), which are the key pathways to achieving a lower-carbon economy.

“While the government and regulator are taking active steps to promote robust green and sustainable focused fund strategies, we are excited that Ninety One is playing a role in providing a long-term solution to meet the rising demand for green funds from investors in this post-pandemic era. Our fund resonates with investors who are looking to contribute to the decarbonisation journey with the prospect of attractive long-term returns,” John Cappetta, head of private banking, Asia advisor at Ninety One, said. 

The companies held by the fund generate at least half of their revenues from the three pathways linked to decarbonisation. The fund favours companies operating in services, infrastructures, technologies and resources related to environmental sustainability. The fund is managed by Deirdre Cooper and Graeme Baker, who have respectively more than 15 and 10 years of experience in the clean technology, energy and environment sector.