Q&A What is the fund's aim? To outperform the MSCI Europe index substantially with a portfolio o...
Q&A
What is the fund's aim?
To outperform the MSCI Europe index substantially with a portfolio of stocks that have strong environmental credentials - we target out performance of 300-500 basis points per annum net of fees.
The fund launched in January. How has performance been to date?
The Virgin Climate Change Fund is up 3.1% from inception on 18 January to 15 February 2008, while the MSCI Europe index is down 2.65%, so the fund has outperformed the MSCI Europe index by 5.75% net of fees. (Source: GLG Partners, Bloomberg)
Can you summarise the investment strategy of the Fund?
Superior stock selection using stocks that have a lighter environmental damage footprint than the average of their sector as well as stocks that we believe are leaders in adopting best environmental practice or providing innovative environmental solutions. Overall we want to construct an outperforming fund with a substantially lighter environmental footprint than the market.
What investment process do you follow?
We start by putting the stocks held in our flagship GLG European Equity Fund through a proprietary green filter. That filter, designed by GLG and using data from Trucost, gives us an environmental damage cost for each stock expressed as a percentage of revenue - basically the percentage of a companies revenue it would need to spend annually to be environmentally neutral. We then compare that cost with the average damage cost for all the companies in the relevant industry sector and if a stock's footprint is lighter than the average it is then considered for inclusion in the Virgin Climate Change Fund portfolio.
This approach ensures that we can construct a portfolio of stocks that we like from a fundamental and valuation standpoint and that have a substantially lower environmental footprint than the market.
We believe that governments, regulators and public opinion will increasingly force these environmental damage costs, which are currently external to a company's P&L, back on to the income statement meaning that those companies who have a lighter environmental footprint will have a competitive advantage and more defensible profit margin. If we are correct then we expect to see the companies with a lighter footprint re-rate and outperform over time.
In addition to that investment strategy which accounts for 75% of the fund we also invest up to 15% of NAV in what we call solution adopters - stocks that aggressively adopt best environmental practice - and up to a further 10% of NAV in solution providers - alternative energy or clean technology companies.
Why restrict investment in solution providers and adopters to 10-15%?
We want to be able to provide a superior return without the volatility that we see in other funds investing in pure clean technology stocks.
How do you go about calculating a company's environmental footprint?
Using data from independent consultancy Trucost who measure a company's footprint based on over 700 individual variables.
Are there any sector or geographical restraints?
As a minimum we invest 80% into European equities, but this is normally closer to 100%. There are no sector constraints, as we are an unconstrained manager.
How would you compare this to typical 'green' funds on the market?
We think that our fund, like other 'green' funds enables investors to access a portfolio of stocks that has a significantly lower environmental footprint than the market average but importantly seeks to do so with substantially less volatility than a typical green fund.
2008 promises to be a challenging year for fund managers. How do you expect the fund to perform in current market conditions?
We expect the fund to outperform the MSCI Europe Index. GLG Partners, can demonstrate a nine-year track record of annual out performance in its flagship long only European Equity Fund (the main source of ideas for the VCCF) in both bear and bull markets.
What's the defensive strategy for the fund?
We are very active in controlling sector, style and other factor risk and being an unconstrained manager are able to completely avoid sectors where we see maximum risk.
What do you think makes GLG stand out from other fund managers?
Firstly, the fact that we are a genuinely unconstrained manager which means that we have no problem with being entirely absent from a sector that we do not like, even if it is a large part of the main benchmark. Second, the fact that we manage long only money alongside our hedge funds gives us a trading discipline that is perhaps tighter than for many funds. Third, that we have a broad range of funds across different asset markets and geographies, which gives us a very good information flow and read across markets. Also, having in-house specialists that work alongside our equity managers but focus purely on credit, emerging markets and macro factors enables us to look at each idea from a different perspective before putting it into a portfolio. This multi-validation process gives us an edge that helps us constantly outperform.
More information on the Virgin Climate Change Fund can be found at www.virginmoney.com
* Class A shares as of 31st January 2008 net of all fees.Source: GLG Partners LP (GLG) is authorised and regulated by the Financial Services Authority. This information is directed only at professional financial advisers. It should not be distributed to, or relied upon, by private investors. Past performance is not a guide to the future. Virgin Money Personal Financial Services Limited is authorised and regulated by the Financial Services Authority.
