As a fettered fund of funds, Pictet environmental megatrend selection fund, will have a fixed allocation of a third to water, a third to clean energy and the final third split equally between timber and agriculture. On a regional basis, it will invest around 33 per cent in North America, 25 per cent in Europe, 10 per cent in developed Asia, and 32 per cent in emerging markets.
It will be managed by senior investment manager Philippe de Weck, who joined Pictet in 2004 as an analyst. He is co-manager of the Pictet clean energy fund and previously worked as an analyst for Credit Suisse First Boston.
The underlying investment universe covers about 1,000 firms with a bias towards small and medium sized companies. It will cover both established firms in developed markets and fast-growing companies in emerging markets. The underlying funds are individually managed, with the investment teams selecting stocks with the best risk and reward trade-off within socially responsible criteria. The new fund will apply a strategic allocation process to the funds, with monthly rebalancing.
As well as drawing on the investment team for each sector, the new fund will use Ethos, the Swiss Foundation for sustainable development, to actively engage with companies in areas where Pictet would like to see improvements.
The firm believes its four investment themes represent good long-term investment opportunities for several reasons. Growth in China and India is leading to a demand for natural resources which is putting pressure on the environment. Global population growth, a fall in fossil fuel reserves, limited water supplies and shrinking forests are also factors which underline the need for sustainable approach. In Pictet’s view, new technologies and services that use less natural resources is important and long-term investing can bring about these changes.
The fund brings to investors the benefits of having a team of specialist managers in a product that has a single management charge. However, some advisers may not like the fixed allocation and may prefer to build their own portfolio of environmental or socially responsible funds. Others might use the Avalon Investment Services socially responsible portfolios or Merchant Investors Eden SRI balanced fund.