Axa Investment Managers has overhauled its Framlington European fund and rebadged it as a clean tech fund, a move which one commentator says could raise possible suitability concerns for existing investors.
The £63.8m European equities fund will be rebranded as the Axa ACT Framlington Clean Economy fund and will be an onshore version of a global thematic equity strategy that has been running for three years.
Amanda O’Toole (pictured) will take over as lead manager on the fund, creating a portfolio of 40 to 60 companies that operate across the clean economy, whose activities support the energy transition and the drive toward resource optimisation, waste and pollution reduction. O’Toole runs the existing offshore clean economy fund.
Axa Framlington European managers Hervé Mangin and Olivier Eugene remain with the business, with Mangin continuing to run the Axa WF Framlington Opportunities fund and Eugene stepping up to become head of climate in May.
Axa IM latest manager to repurpose conventional fund into ESG strategy
Axa IM said the “official reshaping” of the fund forms part of its strategy to consolidate its UK fund range and offer clients more sustainably managed funds, following a surge in appetite for these strategies.
It joins a growing number of providers that have repurposed vanilla-type equity strategies that have struggled to attract assets into ESG funds.
Around 256 funds were rebranded as sustainable in 2020, according to Morningstar, and in the first quarter of this year alone, the number was already at 127. However, fund buyers are concerned this could lead to further instances of greenwashing.
See also: Fund buyers wary as number of funds repurposed as ESG continues to rise
ESG credentials are important but so is suitability
Independent wealth expert Adrian Lowcock says the fact O’Toole has the suitable expertise to ensure the fund does what it says on the tin is important.
O’Toole will invest across four sub-themes that offer measurable, clean economy indicators, such as carbon dioxide emissions, water intensity and waste management and tackle several of the UN’s Sustainable Development Goals involving low carbon transport and natural resource preservation.
A “clean tech” thematic filter, built from quantitative and qualitative analysis, will whittle down global listed equities that have a positive environmental impact and adhere to Axa IM’s sectorial policies and ESG standards.
However, Lowcock said altering the mandate so dramatically could potentially create suitability issues.
“The fund’s objectives, investment style and market are all being changed to the point it will have little or no resemblance to the original. As such it is hard to see that it will be suitable for existing investors who bought the fund for exposure to European equities,” Lowcock said.
“Given there is always an issue with inactivity among investors this could leave some exposed to greater risk or unsuitable investments.”
“Although harder and more expensive, the fairer thing to do is launch a new fund and wind up the existing fund (if necessary) – that way no one is invested in the wrong strategy,” he added.
