Craig Hurt

Global investment firm T. Rowe Price had announced the appointment of Craig Hurt as its new Head of Institutional for Australia and New Zealand, effective October 5. 

Hurt’s leadership appointment will enable the firm’s existing institutional sales team to deepen their channel focus, allowing team members to enhance their level of engagement with clients as the firm diversifies its business in the institutional market.

Based in Sydney, Hurt will report to Darren Hall, Head of Distribution for Australia and New Zealand. He will be responsible for leading a growing team of institutional sales professionals to service existing clients and develop new relationships with relevant investment solutions.

Hurt joins T. Rowe Price after 16 years with AXA Investment Managers where he held the position of country head of Australia and New Zealand since 2007. He has been active in the ESG investing space for over a decade and has had led successful launches of ESG integrated strategies. 

Hall said, “Craig complements the existing team well. He has an extensive track record as an experienced, consultative business builder, and possesses the business acumen and strategic mindset required to navigate a rapidly changing dynamic channel. His reputation and deep connections across the institutional market will support further opportunities for T. Rowe Price’s growth.”

He continues, “ESG and developing strategies suitable for our market is a high priority growth initiative coming into 2022 and beyond. Craig’s extensive expertise in this area, combined with T. Rowe Price’s global ESG capabilities, will shape our local distribution strategy and provide further benefit to clients.”

Hurt said, “The Australian market is rapidly evolving. It is an exciting time to be joining T. Rowe Price’s client-centric team to assist clients through this change with our world-class investment solutions.” 

T. Rowe Price started its Australian presence in 2004 and has a strong foundation for future growth with a well-balanced business across the intermediary and institutional market. 

As the firm’s institutional team enters its next phase of growth under Hurt’s leadership, it will focus on engaging with clients across equity, fixed income, multi-asset and retirement solutions. 

T. Rowe Price currently offers a range of global investment strategies to institutional clients in Australia and New Zealand, as well as Australian Unit Trusts and Separately Managed Accounts to retail and advisor-directed investors in Australia.

Hosting a series of roundtables for Australian institutional clients and consultants across the country this week, AXA IM has identified the key behaviours that have served insurance companies well over the years which include taking a long term, sustainable approach and avoiding benchmarks. The leading investment manager has developed these behaviours into strategies that other large-scale investors can adopt and learn from across asset classes.

Craig Hurt, Head of Australia and New Zealand at AXA IM, said there was a global shift by long term pension fund investors who now use a number of target return strategies adopted for decades by global insurance companies.

“Insurance companies have unique needs that give rise to some very specific behaviours and we think that some of the strategies they employ could be very relevant for Australian investors as this market transitions towards a retirement income phase.

“Insurers focus on generating specific returns to ensure they meet their liability promises rather than the less relevant return from specific market driven benchmarks. This behaviour leads to some very interesting and innovative non-benchmark driven investment strategies and we will be sharing some of these ideas from across equities, bonds and real estate at our round table series this week.”

Equity investing: Non-benchmark aware, sustainability and low volatility hold the key

As part of AXA IM’s research, Gideon Smith, Europe Chief Investment Officer, AXA IM Rosenberg Equities, highlights four key behaviours that local investors can learn from insurers specifically relating to equity investing – avoiding benchmarks, focusing on factors, reducing volatility, and embracing sustainability.

“Insurance companies have been wise to reject cap-weighted benchmarks because they typically have long investment horizons. A relative-return perspective within the context of an overwhelmingly short horizon investment cycle risks sacrificing the long run for the sake of the short run.

“An efficient way of eschewing cap weighted benchmarks is to focus on factors, or risk premia investing, which represents a more direct, low cost and transparent way to improve returns by capturing attractive equity characteristics such as quality, low volatility, value, momentum or small cap. Insurers were also early to adopt strategies that blend these equity factors,” Mr Smith said.

Mr Smith added that large insurance companies also adopted low risk equity investing as a way of maximising the efficiency of their equity allocations.

“Any equity investor interested in reducing volatility and preserving capital would be wise to investigate low risk investing. These strategies potentially offer less variability of return on both a short and long term basis, and typically experience less drawdown during period of equity market stress.

“Large insurance companies also have every incentive to embrace sustainable investing as they are literally bearing the risk for giant societal challenges,” he said.

Locally, AXA IM is managing AUD75m in an Australian domiciled pooled fund, AXA IM ACWI SmartBeta Equity Fund – a fully integrated ESG equity fund offering local investors a more efficient way of capturing long term equity market returns while incurring lower volatility than a capitalised weighted benchmark.

Fixed income investing: better issuer and issuance selection is needed

Lionel Pernias, Head of Buy and Maintain London, AXA IM Fixed Income, said institutional investors would do well to pay attention to issuer and issuance selection when investing in fixed income, and avoiding certain credit bonds.

“The structural changes to the credit market, such as the increased transaction costs and the looming end of the current credit cycle, coupled with the end of quantitative easing, have made credit spread a significant part of the total yield available to investors. Therefore, the quality of credit analysis and risk assessment has become even more important for investors,” Mr Pernias said.

Mr Pernias added that the world’s largest insurance companies were adopting a global, long-term and unconstrained approach in the anticipated less-benign credit environment.

“Going global offers a larger pool of assets and better diversifies fixed income portfolios across sectors. It also has the potential to better manage the duration risk from rising sovereign yield in certain countries.

“An unconstrained approach avoids the pitfalls of a benchmarked approach where the largest allocations are made to the most indebted and potentially risky sectors and issuers.

“This investment approach, combined with a holistic, fundamentally driven research process, takes advantage of multiple themes whilst managing risk effectively and lowering transaction costs,” Mr Pernias said.

AXA Investment Managers (AXA IM) accelerated its growth in 2014 with net new money inflows of A$27billion. AXA IM’s assets under management (AuM) at the end of December 2014 were A$891 billion up 14 per cent from A$782 billion in 2013.

Andrea Rossi, CEO of AXA IM, commented on the results: “We are, unsurprisingly, delighted with the results.  Our focus is very much on managing our clients’ money well and helping our clients achieve their financial objectives.  By continuing to focus on delivering for our clients, the results will come.  These large inflows from our clients are testament to our existing and new clients believing that we are and will continue to be an investment firm that has the necessary capabilities to deliver on their requirements in a variety of areas.  I am also delighted with the significant support we have received in 2014 from our new Australian clients.  Australia is a key market for us and we believe that our partnership approach to Australia’s sophisticated client base will continue to bear fruit in the coming years”.

2014 highlights

AXA IM’s assets under management at the end of December 2014 were A$891 billion, up 14 per cent compared with 2013.  This increase in assets came from strong net new money inflows of A$27 billion and A$82 billion combined market and foreign exchange rate impact.  Net new money inflows of A$27 billion represents a 56 per cent increase on 2013⁽¹⁾.

Revenues were A$1,597 million, up 9 per cent compared with last year, due to increased management fees as a result of the rise in average assets and a diversified product mix⁽²⁾.  AXA IM increased its operating income by 14 per cent generating underlying earnings of A$302 million, up 23 per cent compared with 2013.

AXA IM continued to selectively grow its geographical footprint in 2014.  In the US, AXA IM made a number of significant hires and a Participating Affiliate Agreement was established which allows AXA IM to distribute strategies in the US which are managed in France and will soon be extended to cover the UK.  In 2015, AXA IM will continue to grow its third party business in both the US and Canada, where it won some significant mandates in 2014.

AXA IM has been present in Asia since 1998 with offices in Hong-Kong, Beijing, Singapore, Sydney, and Tokyo, as well as joint-ventures in Shanghai, Seoul and Mumbai.  AXA IM’s joint ventures were extremely successful in 2014 and made a strong contribution to net new money inflows.  In 2014, 21 new funds were added across Hong Kong, Singapore and Australia, bringing the total number of registered funds to 37 across the three markets. In 2015, AXA IM plans to continue to grow its profile, client base and product offering across Asia Pacific.

Craig Hurt, AXA IM’s Director of Australia and New Zealand, commented: “AXA IM celebrates its 20th anniversary this year and are delighted with this great global result.  Locally, 2014 has been a fantastic year.  Our SmartBeta strategies in Global Equity and Global Credit as well as our ESG capabilities have found significant traction with local investors.  Two examples are Mercer Global Investors who now have A$180mn invested in our Global Credit SmartBeta strategy and Financial Index Wealth Accountants who have A$70mn in our Global Equity SmartBeta ESG strategy.  The Global Equity SmartBeta ESG strategy is 5% ahead of benchmark after the first 6 months, has a minimum investment of A$5mn and can be accessed via the BT Asgard platform.  We are delighted that two household names in the Australian market have entrusted us with their clients’ money and we will seek to honour that trust in the years to come.”

On 18-22 May 2015, two people well-known to Australian investors, Tim Gardner, Global Head of Institutional Client Group and Mark Tinker, Head of AXA Framlington Asia will be speaking at AXA IM’s annual roundtable series in Australia.

Andrea Rossi said:“We are becoming more and more global. Today, we employ over 2,300 people, including 250 portfolio managers, in 28 cities across 21 countries. We now employ more than 150 people in the US and over 100 in Asia, not including our joint ventures.  We will continue to expand our global footprint, but in a targeted fashion.  We want to accelerate our growth in key mature markets where we don’t yet have a significant market share, such as the US, Japan and the Nordics. In high growth markets, such as Asia and Latin America, we will continue to develop our distribution coverage.  We will also strengthen our historically robust positions in Europe by reinforcing our presence in the retail and unit-linked markets.  We are committed to ensuring that our offering is as relevant as possible for our clients and therefore take a segmented approach, for example we have a team dedicated to sovereign wealth funds and a strong focus on insurance companies.”

“2014 was a good year for AXA IM with strong financial results and investment performance and continued product innovation.  However, we want to achieve even more in 2015.  We are convinced that our diversity across asset classes, clients, and geographical locations will help us to achieve our growth ambitions.”

AXA Real Estate Investment Managers SGP, an affiliate of AXA Real Estate Investment Managers (“AXA Real Estate”), the leading real estate portfolio and asset managers in Europe^[1], announces that it has raised over $2.2 billion at the first closing of its most recent pan-European real estate debt fund Commercial Real Estate Senior 9^[2] (“CRE Senior 9” or the “Fund”). This fund raising, which follows shortly after AXA Real Estate was awarded a separate $362 million commercial real estate investment mandate from a Dutch insurance company, brings the total commitments received by AXA Real Estate for its debt platform in 2014 to $5.4 billion and takes the total platform to around $14.5 billion.

The Fund is AXA Real Estate’s fourth co-mingled real estate debt fund targeting European third-party institutional investors, and is seeking to raise $3.6 billion in total primarily from insurance companies and pension funds. The commitments for CRE Senior 9 were received from eleven institutional investors from the UK, the Netherlands, France and Switzerland, comprising nine third party clients and two AXA insurance companies. The nine third party investors comprise seven who had invested into AXA Real Estate’s debt platform previously and two new clients, underlining the continued interest in this asset class from both existing participants and new entrants.

This ongoing appetite for investment into loans led AXA Real Estate to innovate a new structure for CRE Senior 9 which allows capital to be recycled back into the Fund once loans have matured, thus allowing investors to retain their investment. In addition to this and in order to access demand from German investors, a specific feeder fund issuing rated notes has been set up, which will allow German regulated investors to participate in a further closing expected in Q1 2015. AXA Real Estate is targeting a final fund size of around $3.6 billion for CRE Senior 9, making it the largest European CRE senior loan Fund in the market.

AXA Real Estate invested $5.2 billion into commercial real estate debt during 2014, including its acquisition of a $1304 million share in a multi-billion Spanish loan portfolio disposed of by a major European bank, and an additional $2.03 billion into infrastructure debt during 2014. The CRE debt platform investments are currently predominantly diversified across four main territories being the UK (34%), France (29%), Spain (20%), and Germany (12%).

AXA Real Estate was the first non-banking player to enter the European real estate debt market in 2005 and, having raised $5.4 billion in 2014, including an investment mandate for a $703 million vehicle created by five Danish pension funds to invest in real estate debt for the first time, its platform now stands at $14.5 billion, of which $10.9 billion has already been invested. This confirms its position as the most advanced and largest of any real estate investment managers active in the CRE loans market in Europe.

Craig Hurt, AXA Investment Managers’ Director of Australia and New Zealand, commented: “At over $2.2 billion, the significant size of this latest tranche of commitments clearly demonstrates how Real Asset Finance has now become an accepted asset class with a specific allocation from most institutional investors. The point is further underlined by both the increased number of investors committing to this fund raise and the growth in the size of their allocations, as well as the fact that there was demand from our clients for a product which allowed capital to be recycled.

“Following on from the FSI recommendations and the ever increasing need for income generating strategies from Australia’s retirees, we are seeing increasing interest in this type of strategy.  We expect that to continue in years to come.”

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[1] Source: INREV Survey 2013 published in May 2014

[2] CRE Loans SCS-SIF – CRE Senior 9

Kev Toohey

AXA Investment Managers (AXA IM) has launched its first ever fully integrated ESG SmartBeta strategy in the Australian market. The AXA IM ACWI SmartBeta Equity Fund (the fund) offers long term investors a more efficient way of capturing equity market beta, while avoiding the limitations of both market cap-weighted indices and alternative weighting schemes.

Powered by AXA Rosenberg, the quantitative investment arm of the global AXA IM group, the fund is now accessible via the Asgard platform, having been seeded with A$55 million from local Australian Financial Services Licensee, Financial Index Wealth Accountants (FIWA).

Kathryn McDonald, AXA Rosenberg’s director of investment strategy, said while smart beta and ESG might seem unrelated, both approaches reflected a move by investors away from standard index tracking.

“Overlaying smart beta with ESG is quite a new and novel concept but it’s one we feel is a very positive step. Our extensive research shows ESG smart beta can offer investors a lower risk and higher return than index investing, along with a defensive strategy with improved diversification and ESG performance – an attractive concept for long term investors.”

The fund also extends AXA IM’s well-established SmartBeta capability from developed to emerging markets via the All Country World Index (ACWI) ex Australia benchmark, offering  Australian investors a one stop shop for their global equity smart beta exposure.

New AXA IM fund now core part of FIWA’s global equity strategy

Advised by independent asset consultants Atchison Consultants, FIWA has said that based on a number of factors, the dealer group is open to increasing investment in the fund over the coming years.

Commenting on the partnership Kev Toohey, General Manager, at Atchison Consultants said the AXA IM ACWI SmartBeta Equity Fund was now a core element of its global equity strategy within the FIWA diversified strategies.

“We saw real value in moving away from a standard passive mandate towards a more effective means of harvesting the global equity beta. We were also attracted by the diversification play the fund’s emerging market exposure offers investors,” he said.

AXA IM’s SmartBeta strategies gaining positive traction

Today’s announcement follows Mercer’s A$150 million allocation to AXA IM’s global credit strategy in April this year. Globally, AXA IM’s smart beta strategies have garnered approximately US$2.5 billion from investors in the past 18 months.

Craig Hurt, AXA IM’s Director of Australia and New Zealand said a greater number of investors were implementing these intelligent, yet cost-efficient solutions:

“Since bringing our SmartBeta credit and SmartBeta equity strategies to the Australian market we’ve seen an increasing number of investors, both institutional and retail, look for a more intelligent and pragmatic approach to capture the market return. It’s exciting for Australia to be leading the charge on smart beta and ESG integration and that more investors, especially those in the post-retirement phase, can benefit from these types of solutions,” he said.

Mercer’s allocation to AXA IM’s SmartBeta credit strategy complements other managers within their global credit portfolio, enabling Mercer to achieve a cost-efficient and well-diversified global credit exposure without the drawbacks of market capitalisation index tracking strategies.

Craig Hurt, AXA IM’s Director of Australia and New Zealand said local funds were taking notice of these intelligent, yet cost-efficient solutions:

“Since bringing our SmartBeta credit and SmartBeta equity strategies to the Australian market we’ve seen an increasing number of institutional investors look for a more intelligent and pragmatic approach to capture the market return,” he said.

AXA IM’s SmartBeta credit strategy takes an active approach to defining the investment universe, providing Mercer with a more attractive risk/return profile than that offered by passive index tracking strategies.

From a universe of bond investments determined by a number of rules-based and fundamental filters, AXA IM’s diversified portfolio is constructed such that it is not unduly exposed to either systemic or event risk at an issuer, sector or regional level. Using relative value analysis, those bonds that are deemed to offer the best value are equally weighted in the portfolio. Given the purchase price of a bond is critical to the overall return of a buy and maintain strategy, this approach maximises the beta of the portfolio over the longer-term.

Unlike index tracking, SmartBeta credit takes a pragmatic approach to portfolio construction and aims to buy well (the fewer issues that have to be sold before maturity the better), diversify intelligently to minimise exposure to risks, and implement efficiently as unnecessary or high transaction costs can destroy returns. AXA IM now manages over $2.5 billion in SmartBeta equity and $1.8 billion in SmartBeta credit.*

“AXA IM has a long and solid track record of managing buy and maintain type strategies and we anticipate further interest in these solutions in the year ahead. Our SmartBeta strategies are gaining significant traction amongst the post-retirement investment options offered by local funds given their focus on effectively harvesting beta while also seeking to minimise losses,” Mr Hurt concluded.

Consideration of environmental, social and governance (ESG) requirements can be compatible with SmartBeta investing according to AXA Investment Managers (AXA IM). Indeed combining the two approaches may produce higher risk adjusted returns than the cap weighted Market Indexfinds AXA IM’s latest ESG Insight – A responsible investment approach to smart beta equity investing.

“Smart beta and responsible investment are both garnering greater attention from investors. They may seem unrelated, but both approaches reflect a move by investors away from the unintentional and often uncompensated risks associated with traditional index tracking and a greater willingness by investors to make their own determinations about desired exposures, risks and expected returns. There has been little academic research on their compatibility to date, but our study shows that ESG SmartBeta can offer investors a lower total risk and higher return than index investing, along with improved diversification and strong ESG performance” comments Matt Christensen, Global Head of Responsible Investment at AXA IM.

According to AXA IM’s research the ESG SmartBeta portfolio which was created for the purpose of the study would have outperformed a ‘vanilla’ SmartBeta portfolio and the MSCI World on both the overall performance and the ESG risk score.[1]

To build the ESG SmartBeta Equity portfolio, AXA IM took its AXA IM SmartBeta Equity strategy as an initial vanilla portfolio. This portfolio is formed by passing the global equity universe through four filters: earnings sustainability, volatility, speculation, and distress. This process reduces exposure to sources of uncompensated risk. The portfolio is then diversified to remove the problem of a high concentration in larger companies that can be present in traditional market capitalisation weighted indices, while avoiding the liquidity risk introduced by many alternative weighted schemes.  The weightings of the smart beta index are then adjusted based on each stock’s ESG score from almost a dozen data points.

“Many investors are now required to incorporate ESG factors into their investment policies” Matt Christensen adds. “It might sound complex managing multiple objectives, but in the real world investors do have many different motivations and needs. If you look at the philosophical foundations of smart beta and responsible investment, the ESG approach is a natural fit with the idea that investors should avoid uncompensated risks. This research shows that SmartBeta strategies can be suitable for ESG investors and can deliver returns over the long-term.”

Craig Hurt, AXA IM’s Director of Australia and New Zealand said: “Overlaying these two strategies is a relatively novel concept and we believe the results provide a positive step for the industry to consider smart beta and ESG in tandem. Now that we have addressed MSCI, our next area to investigate is to include emerging markets and test this approach in an All Country World Index (ACWI) sense,” Mr Hurt concluded.

Smarter strategies required for older investors.

It’s a well known fact we are living longer, in fact a new research paper from AXA Investment Managers (AXA IM) indicates that every day we live we currently gain five more hours of life expectancy.  The paper, ‘Thoughts about the rise in longevity’, considers the complex relationship between populations living longer and the pressure this puts on businesses, individuals and markets on a global scale.

According to the paper, the economic theory of the life-cycle predicts that retirees dissave (where spending is greater than income) to maintain their standard of living despite lower income and switch to less risky assets as their risk appetite reduces, having far-reaching consequences on their retirement savings.

AXA IM Director for Australia and New Zealand Craig Hurt said Australia’s ageing population required smarter strategies that would make their money work harder for longer.

“Longevity is increasing at a pace difficult to apprehend, in many countries, half the babies born today could live 100+ years. As we are living longer superannuation shouldn’t just been seen as a drawdown option after retirement age. Investors need to consider continued growth of their capital for a longer period of time with less volatility. Australian funds are showing most interest in employing smart-beta products for post-retirement portfolios, where there is less sensitivity to tracking error in place of a stable, less volatile return,” he said.

AXA IM launches Global SmartBeta Equity pooled fund for investors in the post retirement phase

AXA IM has expanded its SmartBeta range with the launch of the AXA World Fund Global SmartBeta Equity. The Fund seeks to provide long-term investors with an efficient, well-diversified and low cost way to achieve improved equity market returns by capitalising on market inefficiencies and avoiding the inherent drawbacks of indexing.

In May 2012, AXA IM launched its SmartBeta solution with a series of innovative corporate bond strategies.  Since then the SmartBeta range has been developed to offer smart solutions for harvesting beta from equity markets and fixed income.  On a global scale AXA IM now manages over A$4 billion¹ across its SmartBeta strategies (fixed Income over A$1.6bn and equity approximately $A2.6bn).

The latest addition to this range, the AXA WF Global SmartBeta Equity, is a long-term equity investment strategy that aims to efficiently deliver an improved total risk/return profile for investors. The strategy is designed to achieve 100-200 basis points annualised excess return, with approximately 80% of the market volatility, over the full market cycle. It is intended to avoid full participation in speculative bubbles, and to exhibit less extreme drawdowns during market shocks.

Tim Gardener, Head of Institutional Client Strategy at AXA IM, comments: “Institutional investors want smart, dynamic solutions that generate long-term, cost effective returns. We believe that traditional market cap-weighted indices expose investors to sources of structural systematic risk that, over an investment cycle, are under compensated. In particular, our research shows that volatile stocks and those with poor ‘earnings sustainability’ have been persistent sources of additional risk, but not additional return. Traditional market cap-weighted indices also often concentrate exposure in a relatively small number of large caps. The AXA WF Global SmartBeta Equity has been designed with the aim of overcoming these challenges and, in turn, achieving improved equity market returns for investors, over the full market cycle.”

The AXA WF Global SmartBeta Equity revolves around three building blocks:

1. Systematic filter: to reduce exposure to uncompensated risk and improve sustainable earnings growth
2. Intelligent diversification: to protect against concentration risk, while managing liquidity
3. Smart implementation: to minimise cost.

The Fund leverages AXA Rosenberg’s data platform and proprietary insight into the fundamental drivers of risk and return. For example, their proprietary, forward-looking measure of ‘sustainable earnings growth’ is the cornerstone of the filtering process. AXA Rosenberg has more than 8 years’ experience managing portfolios that target reduced volatility and reject market capitalisation. The Fund also benefits from continuous investment oversight and on-going SmartBeta research and development.

Craig Hurt concludes: “We believe that blindly tracking an index however it is constructed can never be optimal as they studiously ignore real time information and the evolving environment. Our SmartBeta strategies give investors another option – offering an outcome focused, practical investment strategy that seeks a more efficient equity market beta. With a less volatile return profile, these strategies are a good fit for the post retirement phase where members have higher account balances and are more sensitive to periods of drawdown.

Increasing demand for ESG factors across broader range of asset classes including sovereign debt

ESG strategies are set to grow over the next 10 years: AXA

Environmental, social and governance (ESG) strategies are set to grow over the next 10 years fuelled by impact investing, an increased focus on board diversity strategies and the use of ESG factors across a broader range of asset classes such as sovereign debt. This is according to leading global investment manager AXA Investment Managers.

Paris-based Matt Christensen, Global Head of Responsible Investment for AXA IM, who is in Australia this week addressing the Australian Superannuation Investment conference on the future of ESG said: “ESG has been firmly on the investment agenda for the past decade and is one of the fastest growing global investment trends. We feel it’s time to forecast the next ten years to ensure we have the right tools in place to support demand for ‘ESG 2020’.”

Impact investing in particular is starting to catch the attention of sizeable funds both globally and in Australia. AXA IM believes this is only set to increase with the impact investing market predicted to grow to US$500 billion by 2019 or 1% of global assets. [1].

“Broadly speaking, impact investing is defined as investments in businesses and/or funds that generate social and/or environmental benefit in addition to financial return – it can be viewed as a complement to the limits of traditional philanthropy and government programs. The market is still young but its growth has resulted in initiatives that enhance its credibility such as the setting up of standards such as IRIS (Impact Reporting and Investment Standards) or labels such as GIIRS (Global Impact Investing Rating System),” he said.

Supporting another growing trend, AXA IM recently developed a strategy that applies ESG metrics to assess countries’ creditworthiness, risks and opportunities in sovereign debt portfolios.

“Until a few years ago it was rare for investors to consider ESG factors for asset classes beyond equity and corporate fixed income. We’re seeing increasing interest in ESG analysis being applied to asset classes such as sovereign debt. This attention to ESG has only been amplified by the euro zone crisis, which brought the evaluation of sovereign issuers’ creditworthiness to the fore. We are already using this ESG country framework in our core RI funds but we also see an opportunity to expand this to mainstream funds over the coming years,” said Mr Christensen.

A final trend AXA IM predicts will grow rapidly in coming years is board diversity.  Despite some of the largest European and Australian corporations being truly international enterprises, the impacts of globalization remain to be fully seen at the board level.  AXA IM believes the rapid rise of emerging economies will continue to springboard diversity at the forefront of the corporate governance agenda, both now and in the future.

“Up to the present time, diversity has largely been focused on gender balance as research points a link between gender diversity at a board level and a company’s financial performance. However we believe, and research now shows, that other aspects such as nationality can also increasingly be seen as a means to bring a broader range of views and experiences to bear within the leadership of companies across the globe. We recently analysed board diversity among the largest 50 European companies by market cap. The results suggest companies need to bolster senior management boards by shaping their composition in a way that better improves their readiness for success in emerging markets – I imagine this would have a similar outcome among ASX listed companies,” he said.

AXA IM strengthens RI capabilities

A responsible investor since 2001, AXA IM’s goal is to integrate ESG factors across the spectrum of its A$703 billion multi-asset investment capabilities. Over the next ten years the firm plans to further expand its global RI research capabilities.

Craig Hurt, Sydney-based Director of AXA Investment Managers in Australia and New Zealand, said “Through the ongoing expansion of our global RI research and initiatives, we aim to offer Australian institutional investors – and their individual members and investors – a wider opportunity to invest in strategies incorporating ESG principles.”

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[1] Monitor Institute:2009 ]]>

Increasing demand for ESG factors across broader range of asset classes including sovereign debt

ESG strategies are set to grow over the next 10 years: AXA

Environmental, social and governance (ESG) strategies are set to grow over the next 10 years fuelled by impact investing, an increased focus on board diversity strategies and the use of ESG factors across a broader range of asset classes such as sovereign debt. This is according to leading global investment manager AXA Investment Managers.

Paris-based Matt Christensen, Global Head of Responsible Investment for AXA IM, who is in Australia this week addressing the Australian Superannuation Investment conference on the future of ESG said: “ESG has been firmly on the investment agenda for the past decade and is one of the fastest growing global investment trends. We feel it’s time to forecast the next ten years to ensure we have the right tools in place to support demand for ‘ESG 2020’.”

Impact investing in particular is starting to catch the attention of sizeable funds both globally and in Australia. AXA IM believes this is only set to increase with the impact investing market predicted to grow to US$500 billion by 2019 or 1% of global assets. [1].

“Broadly speaking, impact investing is defined as investments in businesses and/or funds that generate social and/or environmental benefit in addition to financial return – it can be viewed as a complement to the limits of traditional philanthropy and government programs. The market is still young but its growth has resulted in initiatives that enhance its credibility such as the setting up of standards such as IRIS (Impact Reporting and Investment Standards) or labels such as GIIRS (Global Impact Investing Rating System),” he said.

Supporting another growing trend, AXA IM recently developed a strategy that applies ESG metrics to assess countries’ creditworthiness, risks and opportunities in sovereign debt portfolios.

“Until a few years ago it was rare for investors to consider ESG factors for asset classes beyond equity and corporate fixed income. We’re seeing increasing interest in ESG analysis being applied to asset classes such as sovereign debt. This attention to ESG has only been amplified by the euro zone crisis, which brought the evaluation of sovereign issuers’ creditworthiness to the fore. We are already using this ESG country framework in our core RI funds but we also see an opportunity to expand this to mainstream funds over the coming years,” said Mr Christensen.

A final trend AXA IM predicts will grow rapidly in coming years is board diversity.  Despite some of the largest European and Australian corporations being truly international enterprises, the impacts of globalization remain to be fully seen at the board level.  AXA IM believes the rapid rise of emerging economies will continue to springboard diversity at the forefront of the corporate governance agenda, both now and in the future.

“Up to the present time, diversity has largely been focused on gender balance as research points a link between gender diversity at a board level and a company’s financial performance. However we believe, and research now shows, that other aspects such as nationality can also increasingly be seen as a means to bring a broader range of views and experiences to bear within the leadership of companies across the globe. We recently analysed board diversity among the largest 50 European companies by market cap. The results suggest companies need to bolster senior management boards by shaping their composition in a way that better improves their readiness for success in emerging markets – I imagine this would have a similar outcome among ASX listed companies,” he said.

AXA IM strengthens RI capabilities

A responsible investor since 2001, AXA IM’s goal is to integrate ESG factors across the spectrum of its A$703 billion multi-asset investment capabilities. Over the next ten years the firm plans to further expand its global RI research capabilities.

Craig Hurt, Sydney-based Director of AXA Investment Managers in Australia and New Zealand, said “Through the ongoing expansion of our global RI research and initiatives, we aim to offer Australian institutional investors – and their individual members and investors – a wider opportunity to invest in strategies incorporating ESG principles.”

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[1] Monitor Institute:2009

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The great rotation from bonds to equities

While recent extreme volatility in global bond markets again raises the question of the role of fixed income in investor portfolios, new analysis from AXA Investment Managers (AXA IM) shows the significant impact a “great rotation” from bonds to equities could have on investor portfolios.

In The Great Rotation paper AXA IM’s leading researchers discuss and analyse investors’ capacity to take on additional risk and the potential for significant asset allocation shifts in the current market environment.

A great rotation is a big shift of strategic long term asset allocation driven by a combination of factors, including: long-term risk budgeting, the regulatory environment, monetary policy and liquidity. In 2013, AXA IM analysis shows these factors have seen a shift from cash to equities, rather than bonds to equities as investors risk appetite returns and they seek higher returning investments.

However, AXA IM’s Director of Australia & New Zealand, Craig Hurt, said any ‘great rotation’ of investor portfolios from bonds to equities could have multiple repercussions on investment decision making.

“For such a move to occur, both market and regulatory conditions would have to support greater appetite for risk. We evaluated the concept of a great rotation with regards to investors’ long-term investment objectives. The impact of a great rotation in global markets on the average Australian could be significant if their asset allocation is not given due attention,” he said.

“Similarly, if there is indeed a great rotation out of bonds and into equities at the same time Australian retirees are moving out of equities and into bonds in the search for a reliable income stream, then retirees may find themselves on the wrong end of a big global trade,” Mr Hurt added.

Focus on the fixed income landscape

According to AXA IM, while bond investors may already have come to terms with the risk that their exposure to high rated government and investment grade bonds will deliver negative real returns over the medium term, there are still a number of options for fixed income investors in an environment of asset class rotation including; reducing portfolio duration, adding inflation protection and yield pick-up.

“Investors can minimise interest rate risk by limiting the duration of their portfolios or by further replacing interest rate risk for credit risk. There is also a strong argument for seeking inflation protection,” Mr Hurt said.

AXA IM believes there are a number of important questions investors should ask to understand the risk of significant asset allocation shifts from bonds to equities.

Firstly, will other assets offer greater certainty of higher returns if bond yields are to remain very low? Secondly, are we on the verge of a bond bear market that will generate a period of negative returns in fixed income? Third, if that is the case, will it be through higher interest rates or a re-pricing of credit risk premiums? Lastly what can bond investors do in an environment of asset class rotation?

Such questions are even more important for an ageing Australian population as they move from the accumulation to decumulation phase.

“Whereas in the accumulation phase there is a focus on real-return growth assets, the investment strategy in the post-retirement world is generally centred on capital protection, inflation protection and yield generation,” Mr Hurt concluded. .

AXA IM’s Great Rotation paper provides an in depth analysis of options available to investors across the various asset classes.