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Focus on the planet – part two

IFA Magazine talks to Ciaran Mulligan and Olivia Trevor from the M&G Treasury and Investment Office (T&IO), Pru’s in-house investment experts, about the new PruFund Planet range of multi-asset funds. We discuss why they believe that the smoothed investment experience for clients with positive outcomes for people and the planet is ideally placed for today’s market conditions.

 

Investment strategy

We then move on to talk about the types of funds in which PruFund Planet invests and how those decisions are made.

Mulligan kicks off by reminding us that the big picture is that PruFund Planet provides investors with access to a globally diverse range of private and public markets, across multiple asset classes and regions. He also tells us that a number of the underlying investments have been created especially for the range.

He comments “We’ve looked to use M&G’s six impact areas as the anchor for the underlying portfolio construction. There are two distinct areas within this, environmental impact areas and areas of society facing challenge. What we mean by environmental areas are things like the circular economy, environmental solutions, climate action etc. On the social side, we consider areas such as social inclusion, better work in education, better health etc. We seek to identify centres of investment excellence, both within M&G and externally across the wider fund management universe, so that we can deliver a well-diversified portfolio for the benefit of our investors.”

Trevor offers some examples to show how this works in practice, highlighting the area of better health as a social issue. She comments “We’ve been working together with the asset manager within M&G to help develop propositions that we think are genuinely differentiating in the market. The M&G Better Health Solutions Fund for example, which is a global equity fund, goes further than simply biotech or pharmaceuticals as you see many of the other funds in that space. It looks to expand that by looking at better health, better hygiene, better wellbeing, sleep and mental health, as well as other aspects of that as well so it’s very holistic in its approach.”

Another example Trevor highlights is in the more environmental areas such as climate and the circular economy in particular where Pru uses its capabilities within the team to source high quality managers externally.

She explains, “while these are relatively new asset classes, we’ve identified a number of managers such as Robeco, Pictet and Wellington who are market leaders in their fields of thematic investing. They have really experienced teams and track records and partnerships with, for example, scientific think-tanks who also help them to continue to be at the forefront of these markets. We’re really excited about partnering with these and many other external managers across our range. We believe that their inclusion adds significantly to the value of the overall product we can offer to investors.”

 

Meeting the challenge of dual objectives

Given that PruFund Planet has both financial and nonfinancial objectives, we ask how the team is working to ensure that it can deliver on both of those different objectives for investors across the strategy.

Mulligan is clear that financial outcomes are still very important. “Of course, our job within the Investment Office is to select funds that we have conviction will deliver on their financial outcomes over the longer term. How do we do that within the Manager Oversight team that I’m responsible for? We have a robust process which takes into account a range of factors, both quantitative and qualitative in nature. It is very much an ongoing process where we continue to assess managers in the context of our expectations of what they will deliver from a financial point of view.”

But it clearly doesn’t stop there. As he continues “ in addition to assessing the quality of the proposition from a fundamental perspective, we’re also working to ensure that Planet delivers on its non-financial objectives, and the assessment of that is both top down and bottom up.”

Trevor picks up the detail, starting with the top down sectors. She comments “firstly, it’s about implementing ESG policies on key topics where we can influence or perhaps have investment control over the mandates. Portfolio managers then have responsibility for implementing that in an economically sensible way to help them do both.

“Secondly, it’s tasking managers to engage with companies to ensure that the fund lives up to these principles as well. Fundamentally, we prefer engagement to exclusion.  We recognise the ability of managers to work with companies and support transitions on those ESG topics.

“From the ‘bottom-up’ perspective, the key aspect to this is us holding managers accountable to their own additional non-financial objectives, too and the way that we believe that they approach those issues. We spoke earlier about the risk opportunity or solution focused categorisation of managers. I think this is really a key benefit of us building those close relationships with the managers and understanding the way that they run their mandates from a fundamental perspective. But also it gives us the ability for regular challenge. For example, if we saw that a Water fund was holding Microsoft, for example, this would be a key opportunity for us to challenge that and how it matches up to what we believe the strategy states and is trying to achieve.

For advisers and paraplanners looking to a multi-asset range with a sustainable focus plus an established smoothing process, PruFund Planet will be a welcome addition to the growing range of funds available to help meet clients’ needs.

 

About the M&G Treasury & Investment Office

T&IO is responsible for the management of Prudential UK’s With-Profits, Annuity and Unit-Linked funds. T&IO works closely with both internal and external asset management businesses, to structure multi-asset portfolios aligned with the investment objectives of clients. The Manager Oversight Team’s oversight responsibility is split into Fund Selection, ongoing investment due diligence and the design of mandates across all traditional and alternative asset classes across the different geographic regions the Investment Office allocate to.

 

About Ciaran Mulligan

Ciaran is the Head of Investment Management Oversight at T&IO, having joined M&G in May 2015.

Prior to joining, he spent 6 years at Buck Consultants, Investment Consultancy which culminated in his appointment as the Head of Global Research where he was responsible for setting up the global research platform across both traditional and alternative asset classes. Prior to joining Buck in 2009, Ciaran was Head of Research and Portfolio Manager for Fixed Income Strategies at Investment Solutions (part of the Alexander Forbes group), whom he had joined in 2003. Ciaran studied Actuarial Science at Heriot-Watt University.

 

About Olivia Trevor

Olivia Trevor is an Analyst in Manager Oversight with T&IO. Olivia joined Manager Oversight in 2019 from M&G’s Investment Graduate Scheme, having joined M&G in 2018. Olivia is a CFA Level 3 candidate and studied Economics at Durham University.

 

 

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