OpenList

Careful selection of ESG active funds is needed to capture portfolios with positive impact, and that can achieve returns in line with expectation.

At Wealth Solutions Partners we have dedicated our research to help you to select and manage assets for investors that are sensitive to those considerations.

Our selection process considers sustainable investments (SI) as synonym of responsible investments. It refers to any investment approach integrating environmental, social and governance (ESG) factors into the selection and management of investments.

The accelerating structural shifts in many economies has prompted investors to look at global megatrends as a way to allocate capital in the hope to capture the changes in the drivers of corporate earnings.

The selection of active managers in thematic investing is a challenging exercise. If your goal is to spot the “best in class” funds, usually you need at least the following basic ingredients ; a peer group (the larger, the better), and a track record (the longer, the better).
It is exactly what is missing most of the time to analyse thematic funds. Many have been launched over the past two to three years, mostly by managers without any track record managing the exact same strategy.

At WSP, we compensate this lack of useful data by focusing more on qualitative analysis. We assess carefully the managers investment processes, the resources, the skillset, as well as the individuals track record. We also spend time to analyse the specific style risks the fund’s investment policy may create, and we compare it with active or passive funds with the most similar thematics.

The WSP selection process is based on two forms of due diligence:

Operational Due diligence (ODD): takes the form of a questionnaire sent to the management company, followed by extensive Q&A sessions, and eventually an on-site visit to the management company’s premises.
This due diligence is designed to assess the management company’s ability to manage a fund from the perspective of operational risk management.

Investment Due Diligence (IDD): focused to the analyse the fund’s characteristics. It is based on a dual approach, both quantitative and qualitative. Quantitative Analysis use a two layer filters : The primary filter includes the intial exclusion criteria. This filter may include the criteria imposed by WSP customers.

The secondary filter is made of a classification according to a proprietary formula (clustering) developed by WSP which makes it possible to classify funds by asset class according to their risk-adjusted performance profiles and the stability of performance over time (scoring).

Only funds with a score of 1 or 2 on a scale of 4 are selected for the next steps.