SARASIN RESPONSIBLE GLOBAL EQUITY FUND: Fund boss who warns markets are ‘pretty hot’
Running a socially responsible investment fund is not just about finding companies that are doing more good than bad. It’s also about ensuring the portfolio is robust enough to withstand any market challenges around the corner.
This explains why Jeremy Thomas, head of global equities at investment house Sarasin & Partners, is tweaking the holdings that make up the £267million Sarasin Responsible Global Equity Fund.
Concerned that stock markets are getting ‘pretty hot’, Thomas is topping up some of the fund’s positions in defensive stocks – such as consumer staples giants Colgate-Palmolive and Reckitt Benckiser – while tickling down stakes in companies such as contract caterer Aramark and hotelier Marriott International where share prices have surged on the back of a reopening of the global economy.
‘It’s difficult to see the anticipated growth and recovery of this year being sustained into 2022 and 2023,’ he says. ‘Interest rates will rise and the economic environment will become more challenging. As fund managers, our view is that we should adopt a more defensive strategy.’
It will not mean any weakening of the fund’s ‘responsible’ theme. Set up nearly ten years ago, it is committed to investing in companies that ‘don’t do harm’ – and once on a company’s share register they will encourage the management to go the extra mile and become more ethical businesses.
For example, it has been gently nudging French train manufacturer Alstom to align its business with the Paris Agreement that commits EU countries to net-zero greenhouse gas emissions by 2050. Similarly, it urged Aramark to support its staff as economies went into lockdown.
The fund’s 46 holdings come from a 100-stock ‘buy list’ compiled by the 15-strong global equities team. The eligible investments tend to fall into five big socially responsible themes – digitalisation, automation, ageing, evolving consumption and climate change.
‘Alstom is a classic example of a climate change holding,’ says Thomas. ‘It is playing a lead role in getting people off planes, out of cars and on to trains, thereby helping reduce carbon emissions. It is also at the cutting edge of technology in train travel with the development of hydrogen-powered trains.’
Holdings that fit into the digitalisation, automation, ageing and evolving consumption themes are respectively Dutch semi-conductor machine manufacturer ASML, US tractor giant Deere & Co, French-listed spectacles maker EssilorLuxottica and UK packaging giant DS Smith.
Occasionally, companies are disposed of if they don’t live up to their socially responsible label. In the past year, positions in both Associated British Foods and US industrial materials manufacturer Hexcel have been sold on these grounds. As a matter of course, the fund will not invest in oil and gas companies – as well as tobacco stocks and businesses involved in armaments.
Investor returns have been impressive. Over the past one and five years, the fund has generated total returns of 45 per cent and 116 per cent. Over the same periods, the FTSE World Index has achieved returns of 46 per cent and 101 per cent.
The portfolio, skewed towards the US, provides a small annual income of 1.4 per cent with payments made bi-annually. The stock market identification code is B8369M5 and total annual charges are just below one per cent. Sarasin & Partners currently manages assets of £18billion and is majority owned by international banking group J Safra Sarasin.