Water is an indispensable life-sustaining natural resource, other than the use for drinking, every item in your home requires water to manufacture, even the smallest components in your gadgets. Other than that, waste water management infrastructure, requires water. Urbanization trends in emerging markets means that these countries require them for decades to come. In addition, changing weather patterns is affecting this resource. Water is indeed a very precious resource in many parts of our lives, society, and environment.
As we are approaching the Year of the Water Tiger, and many of us still in search of innovative investment themes which are also aligned to our values to tactically allocate assets for the year, and with rising interest in thematic investing and a compelling opportunity, why not consider introducing an Environmental, Social and Governance (ESG) thematic equity fund that invests in water related companies? One fund we think investors can consider is the $Natixis Thematics Water R/A USD.
About the Fund
The team
$Natixis Thematics Water R/A USD fund is an unconstrained equity fund that is led and managed by 2 senior portfolio managers,Arnaud Bisschop and Simon Gottelier. Both have a combined average of more than 16 years in the water investments experience as well as more than 20 years of specialized corporate experience in the water industry.
Investment Objective and Approach
The fund aims to contribute globally to the universal provision of clean water, in water pollution prevention and control and more broadly in the global, sustainable use and protection of all water resources while generating long-term growth of capital through a systematic investment process that includes an ESG framework.
$Natixis Thematics Water R/A USD fundis actively managed, it applies a fundamental and bottom-up stock selection process which invests in companies that are involved in water demand management, pollution control, water infrastructure services and water utilities. It identifies companies with an attractive risk-return profile that are driven by secular trends as well as meeting ESG requirements. The reference benchmark is MSCI All Country World Index (ACWI) Net Total Return Index which captures large and mid-cap stocks across 23 developed markets and 25 emerging markets countries (Source: MSCI).
What’s interesting about this fund is, it has an unconstrained and concentrated strategy in a niche market that many of us have yet to explore, which also translates to more opportunities and alpha generation.
How has the fund performed?
Since the fund’s inception in December 2018, it has consistently outperformed the benchmark with an annualised outperformance of 4.13%. Looking at the 1-year return ending 31 December 2021, the fund has delivered 28.9%, outperforming the benchmark by 10.36%, this is due to a strong contribution from stock selection.All segments of the strategy contributed to the performance positively, notably in “Demand Efficiency”, “Pollution control” and “Water Infrastructure”.
Having been actively positioned in anticipation of an economic recovery towards the end of 2020 and considering the more cyclical value positions, the 'Demand Efficiency' segment of the portfolio was the main contributor to the fund's performance during the first quarter, helped by the recovery of the construction and home improvement market, which resulted in strong contributions from Helios Technologies, Alfa Laval and Ferguson. The general recovery in industrial activity, the increase in demand for microprocessors and the tailwind for companies benefiting from the US stimulus package in the infrastructure sector were also positive factors and drove stocks such as Stantec higher.
Continuing their strong momentum in Q2, the portfolio holdings related to the 'Measurement' sub-segment (within the 'Pollution Control' segment) all contributed positively to overall performance thanks to strong earnings prints driven by revenues generated by the Covid-19 (Danaher Corp, Thermo Fisher) testing and vaccination campaigns and the prevalence of the Delta variant. Additionally, during the third quarter, lower sovereign bond yields highlighted the attractiveness of defensive stocks within the ‘Regulated Utilities’ sub-segment (Severn Trent, American Waterworks). However, some companies perceived to be more exposed to rising labor costs and inflationary pressures performed disappointingly (Brightview), as did stocks listed in emerging markets (China Everbright Environment, SABESP, Coway). During the fourth quarter, the strategy continued to benefit from the positive contribution of the 'Demand Efficiency', 'Water Infrastructure' and 'Pollution Control' segments, although consumer-related stocks fared well with strong earnings reports thanks to the strong recovery in demand (AO Smith). Also noteworthy was the strong contribution of Veolia, which benefited from progress in its planned merger with its French counterpart Suez, which is expected to be completed in early 2022. Finally, we should highlight the performance of certain 'Regulated Utilities' companies, that contributed positively to performance thanks to their ability to pass on rising costs (Severn Trent, Essential Utilities)
Within the same period, Natixis Thematics Water R/A USD has outperformed a similar strategy fund in 2021 by 6.38%. This can be achieved due to the unconstrained, concentrated strategy where the portfolio managers have the flexibility to allocate assets while taking the different economic cycles into consideration.
Why we like this fund?
Looking at the market capitalization breakdown, 39.0% is allocated to mid-caps (USD 2 to 10B) while 50.3% is allocated to big-caps (USD 10 to 100B). As this is a thematic fund, it meets the criteria that it is not overweight in the mega-caps (more than USD 200B) of the sector thereby allowing greater room for active management and potential growth from these mid to big-cap companies.
Therefore, by investing in $Natixis Thematics Water R/A USD, investors benefit from the long-term sustainable growth of the sector that is worth USD1.9 trillion in market capitalization while leveraging on the expertise of the investment team to generate alpha yet at the same time it can further diversify their total portfolio as they look to transform their portfolio that is more aligned with their ESG principles.
Fund Mall Product Offerings
There are also other share classes available on Fund Mall,
$Natixis Thematics Water R/A USD(LU1923621640.USD)$
$Natixis Thematics Water R/A SGD(LU2125910336.SGD)$
$Natixis Thematics Water H-R/A SGD(LU2125910179.SGD)$
Disclaimer: The information herein was obtained and derived from sources that we believe are reliable, but while reasonable care has been taken to ensure that stated facts are accurate and opinions are fair and reasonable,Tiger Brokers(SG) does not represent that it accurate or complete and it should not be relied upon as such. The information expressed herein is current and does not constitute an offer, recommendation, or solicitation, nor does it constitute any prediction of likely future performance.
Comments
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