Fidelity International has taken a Polar Capital water and waste utilities specialist to launch a thematic fund, hinting it wants to build out its environmental, social and governance range, which now consists of two products.
Bertrand Lecourt joined Fidelity in July from Polar Capital where he ran a paper portfolio that never launched.
Lecourt will manage the Fidelity Funds – Sustainable Water and Waste Fund, which will be domiciled in Luxembourg with sterling, US dollar and euro share classes. Its ongoing charges figure will be 1.1% and it is benchmarked against the MSCI ACWI.
A niche area
The Sicav will invest across the water and waste value chains, including in companies developing new technologies to meet ever growing demand.
Chelsea Financial Services managing director Darius McDermott said Fidelity is a global giant that is likely to have greater distribution than a boutique like Polar Capital. “It’s a really niche area,” said McDermott. Pictet and Impax funds would be the main rivals to the Fidelity fund, he said.
Lecourt said companies in the sector remain relatively unexplored by investors. However, there is increasing demand for clean water, waste management and sanitation needs, particularly as populations become larger, wealthier and more urbanised.
The fund provides diversification from global equities, growth potential and can boost the ESG profile of portfolios, he said.
Thematic funds with a narrower exposure, like water and renewable energy, are likely best used to complement rather than replace existing core holdings, said Morningstar head of sustainability research Hortense Bioy. However, others like low-carbon and gender diversity funds offer broad market exposure and therefore may be used as part of a core allocation, Bioy said.
Fidelity hints at ESG push in 2019
The fund is the second ESG product from Fidelity International following the launch of First ESG All Country World in June 2017. In the period since launch, that fund, which now has assets totalling £79.17m, has returned 3.45% compared to 8.07% in the fund’s benchmark and 7.60% in the MSCI AC World.
Fidelity First ESG All Country World performance
| 1m | 3m | 6m | 1yr | 3yr | 5yr | |
| Fidelity First ESG All Country World A EUR in GB | 3.08 | -6.57 | -1.21 | 0.82 | – | – |
| MSCI ACWI ESG Leaders GTR in GB | 3.51 | -6.01 | 0.23 | 2.16 | 50.00 | 75.30 |
| MSCI AC World GTR in GB | 3.51 | -5.60 | 0.46 | 2.92 | 52.17 | 76.58 |
Source: FE Analytics
Romain Boscher, global CIO for equities at Fidelity International, said Fidelity would continue to explore new and differentiated products in this field in 2019.
“You don’t really think of Fidelity and ESG in the same breath,” McDermott said. However, he said they have clearly seen the rise in sustainable investing as something they wish to pursue.
