FFG EUROPEAN EQUITIES MODERATE SUSTAINABLE MODERATE
This is a marketing communication. Please refer to the FFG Fund prospectus and the KID on www.fundsforgood.eu before making any final investment decision. This document does not constitute any contractual document or investment advice.
Founded in 1986, Acadian Asset Management is an active quantitative manager investing in global equities. Headquartered in Boston, the firm has offices in London, Singapore, Tokyo and Sydney. Acadian Asset Management has over EUR 100 billion under management.
Formed in 2021 from the merger of DMS, MontLake and MDO, Waystone has over 20 years of experience in providing institutional governance, risk and compliance services to the asset management industry. Waystone is now a leading player in the industry.
INVESTMENT OBJECTIVES & POLICY
FFG European Equities Sustainable Moderate seeks long-term capital appreciation through a diversified portfolio, while keeping the risk of capital loss limited and the level of volatility below that of equity markets. The investment strategy of the fund can be described as “defensive”.
The sub-fund is a feeder sub-fund which invests at least 85% of its net assets in the FFG – European Equities Sustainable sub-fund (the “Master Fund”), and more precisely in class I. The Master Fund seeks long-term capital appreciation through a diversified portfolio of equities of European issuers and seeks to outperform a broad European equity index. In order to limit the exposure of the sub-fund to the risks of the equity markets, a systematic hedging of the equity exposure will be implemented. Hedging will limit the Fund’s exposure to the equity market to a maximum of 50%. Portfolio assets not invested in the Master Fund or in hedging instruments will be held as cash in the Fund. The Fund is actively managed without regard to a benchmark in setting the Fund’s investment policy.
|Launch of the strategy||20/12/2018|
|Type of fund||Equities|
|MANCO||Waystone Management Company (Lux)|
|Manager||Acadian Asset Management LLC|
|Custodian Bank||Banque de Luxembourg|
|Country of registration||BE, LU, FR, ES|
|Minimum investissement||1 unit|
|Duration of the fund||Unlimited|
RESPONSIBLE INVESTMENT POLICY
The fund is categorised as a financial product with a sustainable investment objective as defined in Article 9 of the SFDR as well as contributing to a reduction in carbon emissions in order to achieve the long-term global warming limitation targets set by the Paris Agreement. This implies that the issuers of the securities held by the sub-fund meet certain sustainability criteria* defined by Funds for Good in its “Responsible Investment Policy”, which is a three-tiered corporate social responsibility policy defined and monitored by Funds for Good SA. This policy includes a) excluding a range of issuers from the investment universe, either because they are or have been subject to serious sustainability controversies (human rights abuses, environmental scandals, gross corruption, serious violations of basic ethical standards) or because the economic activities from which they derive their revenues could have negative effects on sustainability factors. These economic activities include, among others, the design, production, maintenance or trade of weapons, the production of tobacco products, the extraction of thermal coal or non-conventional oil and gas. b) The portfolio is constructed to achieve, for equity investments, a carbon footprint at least 20% lower than a representative equity universe used by the manager for the composition of the equity portfolio, and an increase in the social quality of the companies compared to this same universe. c) Regarding governance, both the manager and the distribution coordinator are signatories to the United Nations Principles for Responsible Investment (UNPRI) and a voting rights policy is implemented. The voting rights are exercised by the fund manager. The Funds For Good “Responsible Investment Policy” and the exclusion list are available at www.fundsforgood.eu.
The fund has been awarded the “Towards Sustainability” label, an initiative to which Funds For Good is also a signatory. The Towards Sustainability label aims to ensure that labelled products meet a minimum level of sustainability, as measured by the Towards Sustainability quality standard, and to provide relevant and useful information that allows you to determine whether a specific product policy is in line with your personal values.
The achievement of this label by the fund is valid for a limited period of time and is subject to reassessment. Furthermore, the achievement of the label by the fund does not mean that it meets your own sustainability objectives, nor does it mean that it meets the requirements of future national or European regulations. For more information on this subject, see www.fsma.be/fr/finance-durable.
The sustainability criteria are certified by the “Towards Sustainability” label. The assessment of the sustainability criteria is done by the manager, Acadian Asset Management LLC. The starting universe used by the manager for the composition of the equity portfolio. Data source: Acadian Asset Management LLC
Risk/return indicator: 4.
The risk/return indicator is 4, as the value of the share may move moderately and therefore the risk of loss and the opportunity for gain may be moderate. Historical data, such as that used to calculate this indicator, may not be a reliable indication of the future risk profile of the fund. There is no guarantee whatsoever that the risk indicator will remain unchanged, so it may change over time.
What does the synthetic risk & reward indicator represent?
Expressed on a scale from 1 (low risk with potentially lower return) to 7 (high risk with potentially higher return), the risk & reward indicator prescribed by law is determined on the basis of the fund’s volatility or sensitivity to the market. It reflects the fact that investments made in this sub-fund are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate can rise and fall and investors may not recover their initial investment. The sub-fund described above involves a risk of capital loss. The repayment of the initial investment is not guaranteed. The lowest category is not a risk-free investment. This risk indicator is also included in the “Key Investor Information” document. The figure is calculated for an investor in euros.
Which important risks are not adequately addressed by the synthetic indicator?
• The use of listed futures and/or options contracts is intended to mitigate market and currency risks at the portfolio level, but not to eliminate them completely.
There may be other risk factors which an investor should consider in light of their personal circumstances and particular present and future circumstances. Further information on the risks of investing in the Fund is set out in the Key Investor Information Document and in the relevant section of the Fund’s prospectus, which is available from the Management Company and on the website www.waystone.com.
INFORMATION ON SUSTAINABILITY
The Sub-Fund promotes environmental and social characteristics such as the reduction of carbon emissions, the respect of international standards on human and labor rights, the exclusion of controversial activities, the prioritization of virtuous companies in terms of environmental, social and governance issues and the fight against poverty through job creation. The sub-fund will not make sustainable investments.
Important remark: The environmental and social characteristics are promoted via the investment by this sub-fund in another sub-fund, FFG European Equities Sustainable (the “Master Fund”). According to its investments strategy, this sub-funds invests at least 85% of its net assets into the Master Fund. The remainder of the assets are cash investments and investments for the purpose of hedging. The derivative instruments in which the sub-fund invest are not used to attain the environmental and social characteristics promoted by the sub-fund
b. No sustainable investment objective
The sub-fund promotes environmental and social characteristics but will not make sustainable investments.
c. Environmental or social characteristics of the financial product
Carbon Reduction: The portfolio construction process will make such that the carbon emissions of the portfolio will be reduced compared to the reference benchmark of the sub-fund.
Compliance with international human and labor rights standards: This Sub-Fund will only invest in securities issued by companies that comply with international human rights, labor, environmental and anti-corruption principles, standards or frameworks.
Exclusion of socially controversial activities: This Portfolio will only invest in securities issued by companies that are not materially involved in economic activities considered harmful, such as (but not limited to) the manufacture and trade of arms, tobacco or coal.
Prioritization of environmentally, socially and governance virtuous companie: Issuing companies must have a minimum ESG score as calculated by MSCI. This score covers all three dimensions of ESG and gives an indication of how a given issuer compares to other issuers in terms of ESG risk. The imposition of a minimum ESG score avoids investing in companies that could result in significant ESG risk to the sub-fund. In addition, companies with the worst labor management records will be excluded from this sub-fund.
Promoting job creation to fight povert: In addition to the environmental and social characteristics promoted by the Portfolio through its investments, investing in this Portfolio indirectly generates a concrete social impact through Funds For Good, the distribution coordinator of the SICAV. After deducting its operating expenses, Funds For Good donates the greater of 50% of its net profits or 10% of its revenues to the social project it has created and manages, “Funds For Good Impact”. “Funds for Good Impact” dedicates all of its financial resources to the fight against poverty by promoting job creation. “Funds for Good Impact” grants interest-free, unsecured loans to people in precarious employment situations who have a business project. This financial support (coupled with human support in the form of coaching) enables these entrepreneurs to create their own business. More information is also available at www.fundsforgood.eu.
d. Investment strategy
As a “feeder fund” into FFG European Equities Sustainable (the “Master Fund”), this sub-fund applies the following strategy.
Firstly, the investment strategy will ensure that the weighted average carbon emissions (scope 1 + scope 2) of the equity portion of the portfolio are always at least 50% lower than that of the reference index of the sub-fund (l’indice MSCI Europe).
The sub-fund also applies an “exclusion” strategy, whereby issuers of financial securities are excluded from the investment universe if they do not comply with certain international standards, and/or are involved in controversial activities beyond a pre-defined materiality threshold, or if they are in the bottom 5% of its investment universe in terms of Labor Management Score. This strategy is also based on an exclusion list of issuers (companies and/or states) in which the Sub-Fund may not invest.
Finally, the sub-fund also applies a “best-in-universe” strategy, selecting only issuers with a minimum ESG score (as calculated by MSCI) depending on the investment universe in which the issuer is located. Two universes are distinguished here: the universe of companies from developed countries, and the universe of companies from emerging countries.
e. Proportion of investments
The Sub-Fund invests at least 85% of its net assets in the Master Fund. On an ancillary basis and in order to limit the exposure of the Sub-Fund to equity market risks, a systematic hedging of the equity exposure will be implemented. The hedging will limit the exposure of the fund to the equity market to a maximum of 50%. The assets of the portfolio not invested in the Master Fund or in the hedging instruments will be kept as cash in the Sub-Fund.
Derivatives are used for hedging purposes. Equity derivatives are used primarily to limit the fund’s exposure to the equity market to a maximum of 50% and secondarily to rebalance the fund’s regional exposure. Currency derivatives are used to modify the portfolio’s currency exposure and reduce the currency risk for a EUR investor. These derivatives are not used to attain the environmental or social characteristics promoted by the sub-fund.
f. Monitoring of environmental or social characteristics
The environmental and social characteristics promoted by the fund are measured with financial and non-financial data published by companies or external data providers. Internal estimates may be used when certain data is not available. The total characteristics of the fund are measured via a portfolio construction process and implemented via a systematic model by the investment manager.
Involvement in controversial activities, compliance with international human and labor rights standards, minimum ESG scores and the carbon profile of the sub-fund are monitored on the basis of financial and non-financial information published by the portfolio companies or by third-party data providers, or estimated internally by the investment manager.
Compliance with environmental and social characteristics is monitored before each new investment and on a regular basis after the investment has been made.
h. Data sources and processing
A mixture of external data, primarily from self-reported carbon emissions data, as well as internal modelling estimates are the data sources to measure the attainment of the environmental characteristics promoted by the product. The Investment manager has a dedicated team of data scientists who scrub and clean data received in order to ensure data quality. A dedicated Investment Process and Data Team ensures that data is processed efficiently and without issues.
The majority of emissions data is obtained from third party data sources, however even within this purchased data, data vendors themselves use modeling or estimation techniques where reported data isn’t available. Where no data is available from third party vendors, the investment manager estimates the remainder.
i. Limitations to methodologies and data
ESG data coverage doesn’t typically cover the investment manager’s full investment universe of stocks. In addition to this, estimations are often used and even when data is available, there are cases where methodologies of data calculations are open to interpretation and therefore debatable.
Despite these limitations the data received and ultimately processed are robust and can be relied upon sufficiently to be utilized within the investment process. The investment managers continuously monitor available data to discover improved data. Beyond this, the investment manager regularly strengthens its data team and internal modelling capabilities in order to continuously improve data use and data reliability.
Neither the Investment Manager, the Management Company nor the Distribution Coordinator can assume any responsibility for the accuracy of the valuation by external data providers and the accuracy, including completeness, of the analyses prepared by third party providers. The Investment Manager, the Management Company and the Distribution Coordinator have no influence over any disruptions or limitations (e.g. due to estimates) in the analysis and preparation of research by third party providers.
j. Due diligence
The Investment Manager assesses each of the underlying assets within the financial product based on over 100 underlying signals or factors, both for the financial and the environmental and social characteristics that the sub-fund promotes. This helps provide a robust assessment of each and every underlying asset. Rigorous controls are in place such as compliance systems, a data team and Portfolio Management oversight.
k. Engagement policies
Engagement is part of the strategy. The investment manager engages both directly with companies as well as via collaborative engagement efforts. The engagement themes include Climate Change, Corporate Culture, Corporate Behaviour and those involved in Escalating ESG Controversies.