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Focus on the planet – part one

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.

 

As the world digests the outcomes from the recent UN Climate Conference in Glasgow, matters of sustainability are increasingly affecting behaviours of people and businesses given concerns for the future health and existence of the planet.

Investment is a crucial part of this. Ciaran Mulligan and Olivia Trevor clearly believe that investing sustainably has now become a major consideration for advisers and their clients. As they recently told IFA Magazine, both Mulligan and Trevor believe that more and more investors are becoming aware of the potential which planet-friendly investments offer in helping to shape the world we live in. That’s why their investment team is investing in funds which, they believe, can deliver positive outcomes as well as competitive returns for investors.

It’s the rationale behind PruFund Planet, a new range of five globally diversified, smoothed multi-asset funds each with their own risk profile. The funds enable advisers to design an investment strategy that suits their individual client’s attitude to risk and reward and as well as their sustainable investment priorities. According to Mulligan, they are designed for clients who want to know their savings are creating positive outcomes but who also want a smoothed investment experience.

 

Smoothing plus ESG

The key difference from the traditional PruFund range is that PruFund Planet is designed to build upon the strengths of the existing fund range. Whilst both ranges have environmental, social and governance (ESG) factors as a core tenet, PruFund Planet also applies an additional lens to prioritise sustainability and positive impact.

When we ask Mulligan what the new range is all about, he explains “the PruFund Planet range invests across our broad spectrum of positive outcomes from protecting to improving the planet, covering areas such as clean technology and renewable energy to social enterprise. A key consideration for advisers is that the funds benefit from our established smoothing process, to help balance out short term market volatility and deliver steady returns for their clients over the long-term.”

Central to the new proposition is the leveraging of the existing investment engine within the Treasury and Investment Office (T&IO) of Pru. There are three key areas here which Mulligan highlights commenting, “firstly, it’s about the strategic asset allocation; this spans across a broad range of asset classes, both public and private – including equity, fixed income, property, alternatives and cash. At the broad asset level, the strategic asset allocation for the PruFund Planet funds is similar to that used for the Risk Managed PruFund range.

“Secondly, it relates to the manager selection stage including mandate design and creating portfolios that can leverage underlying fund managers’ strengths.

“Thirdly, it’s about the portfolio management skill sets. Importantly, for advisers and their clients, this all comes with the benefits of the smoothing process that lies at the heart of the PruFund range. The key difference with the PruFund Planet is its focus on the environmental and societal outcomes in addition to the financial outcomes.”

 

What are the outcomes?

“Broadly, we have three categories of outcome. These begin with mitigating ESG risks and minimising negative outcomes, then we look to pursue ESG opportunities and finally it’s about actively contributing to the solution, particularly for disadvantaged groups or stakeholders.

“It is useful to understand this in the context of where PruFund Planet sits on the Impact Management Project’s (IMP) spectrum of impact. This covers a broad range from financial-only objectives where there may be more limited emphasis on ESG matters, through to philanthropy on the other end of the spectrum, where there is a total trade-off in returns in exchange for that positive impact.

“PruFund Planet is looking to invest in the areas which occupy the middle ground of this spectrum; that’s where we believe that we have the best opportunities to invest clients’ money to create positive impact whilst, importantly, aiming to avoid any potential financial trade-off. We have aligned this with our T&IO ESG product framework as it helps us to categorise and then communicate the impacts which are made by the strategies within PruFund Planet with advisers and clients alike.

“Importantly, it means that we take a step back from some of the academic arguments that often surround impact. We simply want to use this transparent process to help clients understand exactly how their money is being put to work for the causes that they care about. This is crucial to our process.”

She goes on to say that there are three aspects to this and all leverage the insights from the IMP. She says “we see this as best practice in impact measurement and impact management to determine the intentionality of that impact. Firstly it’s about ‘risk-focus’, which does what it says on the tin and relates to strategies that fundamentally view ESG as a risk to be managed. Secondly, is ‘opportunity-focused’ where ESG is viewed as an opportunity and thirdly, is the ‘solution-focused’ aspect, where we are actively trying to contribute to the solution for many environmental or social challenges through those strategies.

To discover more about the PruFund Planet range, please follow the link here

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