Celebrating impact investing with the Federated Hermes Impact Opportunities Equity Fund.
We look at the portfolio from five angles
to see what makes it different to its peers and why impact investing is more topical than ever.
Presenting the Federated Hermes Impact Opportunities Equity Fund
Ingrid Kukuljan, head of impact investing at Federated Hermes and lead portfolio manager of
the Federated Hermes Impact Opportunities Equity Fund, provides a snapshot of the
five key attributes of the fund.
Discover what impact investing means to Federated Hermes and how the fund aligns itself with
the UN SDGs to invest long term in companies that are making
a positive impact on the world and society.
FOR PROFESSIONAL INVESTORS ONLY
“Before impact investing, responsible investing strategies in general were used as risk mitigation tools, so investors were using them to identify companies that were destroying shareholder value. Now, they are using them to identify the companies that are resolving the most pressing issues in the world,” says Kukuljan
In its most simple form, Federated Hermes defines impact investing as investing in those companies that provide solutions which have a positive impact on people and the planet.
Ingrid Kukuljan, head of impact investing at Federated Hermes and lead portfolio manager of the Federated Hermes Impact Opportunities Equity Fund, says that by meeting the underserved needs of society and the environment, as captured by the United Nation’s Sustainable Development Goals (UN SDGs), impactful businesses are directly exposed to sources of enduring demand – “the beta of future growth”.
The Covid-19 pandemic has created a paradigm shift for responsible strategies overall as impact investing goes beyond simple ESG and sustainability integration.
The value of investments may go down as well as up so investors may not get back what they originally invested.
With an active share of 99%, the fund sticks with its winners rather than actively trading to satisfy short-term performance targets.
Fund invests in
Investing in 20-50 global companies, the Federated Hermes Impact Opportunities Equity Fund is described as an unconstrained high conviction, style agnostic portfolio. The focus is not on the heavyweights in the index today, but those companies it believes will generate the growth of tomorrow.
“We are patient capital investors seeking to capture opportunities created by mega trends, investing in companies that create positive, sustainable impacts and have the potential to generate strong long-term investment returns,” says Kukuljan.
Taking a thematic approach to idea generation, the fund invests in nine themes that align with the UN SDGs: water, food security, health & well-being, education, financial inclusion, future mobility, impact enablers, energy transition and circular economy.
UN SDG aligned
Federated Hermes has also developed a proprietary impact database, where it quantifies the impact of each one of its holdings. This means the only companies held in the portfolio are those which have a positive impact on the environment or society.
Fund manages a total of
Federated Hermes has
in impact investments
sustainable investment experience
Having been investing sustainably for over three decades, Federated Hermes was one of the first groups to launch an impact fund and today manages a total of £232.1m in the Impact Opportunities Equity Fund.
To capture the long-term benefits of corporate impacts, the fund aims to hold companies for five to 10 years, resulting in very low portfolio turnover (less than 25%).
The fund also leverages the experience and expertise of EOS at Federated Hermes (EOS), one of the world’s largest stewardship providers. “If you want to be an impactful investor you need to engage with companies and we are very fortunate to have EOS as part of our company,” says Kukuljan.
F share class US Dollar Accumulating as at 31 August 2020.
Source: Federated Hermes.
Fund team has
combined investment experience
With 23 years’ industry experience, Ingrid Kukuljan took over as lead manager of the fund – which launched in December 2017 – on 1 September 2020. She joined Federated Hermes in February 2020, moving from PDM Capital where she managed a thematic equity fund.
Kukuljan is supported by co-portfolio managers Martin Todd and Amelie Thevenet, with senior investment analyst Jordan Patel joining the team in September. This team in turn is supported by Federated Hermes’ deep expertise across a range of specialist teams.
Kukuljan says: “Since the start of the year I have been rebuilding the team, which is now all in place. Not only does the team have a track record in responsible strategies, most importantly they have a passion for impact investing.”
Since launch on 21 December 2017, the fund has generated an annualised return of 13.69%, net of fees and has outperformed its benchmark (MSCI All Country World IMI Index) by 7.24%.
Over the year to 31 August, the fund has delivered a return of 13.65%, outperforming the benchmark by nearly 10%.
Kukuljan says: “The performance in 2020 proves how resilient the strategy is to market downturns, demystifying the myths that there is a trade-off between investing for good and making money, and that in order to deliver alpha investors must look to the US or the technology sector.”
Rolling performance (%)
Past performance is not a reliable indicator of future results.
Source: Federated Hermes as at 31 August 2020. F share class USD accumulating net of all costs and management fees. Benchmark is the MSCI All Country World Investable Market Index (IMI). Inception date is 21 December 2017.
Benchmark source: MSCI. The MSCI data is comprised of a custom index calculated by MSCI for, and as requested by, Federated Hermes. The MSCI data is for internal use only and may not be redistributed or used in connection with creating or offering any securities, financial products or indices. Neither MSCI nor any other third party involved in or related to compiling, computing or creating the MSCI data (the “MSCI Parties’) makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and the MSCI Parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to such data. Without limiting any of the foregoing, in no event shall any of the MSCI Parties have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.
The value of investments and income from them may go down as well as up, and you may not get back the original amount invested. Any investments overseas may be affected by currency exchange rates. Past performance is not a reliable indicator of future results and targets are not guaranteed.
For professional investors only. This is a marketing communication. This document does not constitute a solicitation or offer to any person to buy or sell any related securities, financial instruments or products; nor does it constitute an offer to purchase securities to any person in the United States or to any US Person as such term is defined under the US Securities Exchange Act of 1933. It pays no regard to an individual’s investment objectives or financial needs of any recipient. No action should be taken or omitted to be taken based on this document. Tax treatment depends on personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional and/or investment adviser as to its suitability. All figures, unless otherwise indicated, are sourced from Federated Hermes. All performance includes reinvestment of dividends and other earnings.
Federated Hermes Investment Funds plc (“FHIF”) is an open-ended investment company with variable capital and with segregated liability between its sub-funds (each, a “Fund”). FHIF is incorporated in Ireland and authorised by the Central Bank of Ireland (“CBI”). FHIF appoints Hermes Fund Managers Ireland Limited (“HFMIL”) as its management company. HFMIL is authorised and regulated by the CBI.
Further information on investment products and any associated risks can be found in the relevant Fund’s Key Investor Information Document (“KIID”), the prospectus and any supplements, the articles of association and the annual and semi-annual reports. In the case of any inconsistency between the descriptions or terms in this document and the prospectus, the prospectus shall prevail. These documents are available free of charge (i) at the office of the Administrator, Northern Trust International Fund Administration Services (Ireland) Limited, Georges Court, 54- 62 Townsend Street, Dublin 2, Ireland. Tel (+ 353) 1 434 5002 / Fax (+ 353) 1 531 8595; (ii) at https://www.hermes-investment.com/ie/; (iii) at the office of its representative in Switzerland (ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich www.acolin.ch). The paying agent in Switzerland is NPB Neue Privat Bank AG, Limmatquai 1/am Bellevue, P.O. Box, CH-8024 Zurich.
Issued and approved by Hermes Fund Managers Ireland Limited (“HFMIL”) which is authorised and regulated by the Central Bank of Ireland. Registered address: The Wilde, 53 Merrion Square, Dublin 2, Ireland. HFMIL appoints Hermes Investment Management Limited (“HIML”) to undertake distribution activities in respect of the Fund in certain jurisdictions. HIML is authorised and regulated by the Financial Conduct Authority. Registered address: Sixth Floor, 150 Cheapside, London EC2V 6ET. Telephone calls will be recorded for training and monitoring purposes. Potential investors in the United Kingdom are advised that compensation may not be available under the United Kingdom Financial Services Compensation Scheme.