The Osmosis MoRE World Resource Efficiency fund takes long positions in global listed companies within developed markets that have highly efficient water and energy saving practices, while shorting the least efficient stocks.
The fund is billed as a market neutral strategy that targets both a financial and environmental return.
Stocks across thirty-three sectors will be identified using Osmosis’ proprietary model of resource efficiency (MoRE) database it developed in 2010.
Companies will be scored based on their efficiency in using energy and water inputs while producing the least waste, per unit of revenue generated.
Using this database the Osmosis research team said they have developed an alpha generative investment factor that is uncorrelated to style characteristics like growth, value and momentum. They claim the factor will allow them to build a portfolio which is market neutral, sector neutral and dollar neutral.
This approach is the same one used by Osmosis’ existing eight long-only strategies.
Meanwhile the fund will target returns of Libor + 5 to 6% per annum over a rolling three year period.
The fund, set to launch on 3 August, has already secured £30m of backing from a European asset owner.
At launch, the portfolio comprises 200 holdings with the long book 87% more resource efficient than the short book using the Osmosis efficiency metrics.
Ben Dear chief executive officer at Osmosis said clients are increasingly sharing their view that resource efficient firms outperform their same sector peers. He said the group has seen “substantial” flows of $1bn in the last 12 months.
“Asset owners around the world are seeking responsible and sustainable investment opportunities – without sacrificing return on the altar of sustainability,” said Dear.
“We looked at the lack of solutions in the alternatives space and used our tried and tested process to create a market neutral fund that rewards resource efficient firms and penalises inefficient ones. It offers clients much needed absolute returns, uncorrelated to equity markets, with a significantly reduced net environmental footprint.”
