JP Morgan targets sustainability alpha with new ESG-focused long/short hedge fund launch
JP Morgan Alternative Asset Management is rolling out a new long/short ESG-focused hedge fund strategy, which aims to generate alpha by trading a range of global sustainability themes – but warns that more work is needed on ESG education within the hedge fund industry.
The USD100 million JP Morgan Multi-Manager Sustainable Long/Short Fund will utilise long/short equity managers and high-conviction trades, focusing on companies that lead their peers in sustainable performance as well as those that will benefit from long-term sustainable themes - including energy transition, resource efficiency, empowerment, and technology for sustainability.
The sustainability-themed investment approach will identify structural changes in companies, leading to “winners” and “losers”. Specifically, the strategy’s long portfolio will build positions that are screened using the firm’s proprietary ESG (environmental, social and governance) ratings framework – while short ideas will zero in on those firms lagging in long-term sustainable change.
“Sustainable alpha can be generated where the impact of structural changes is under appreciated and incorrectly priced,” Jamie Kramer, global head of JPM Asset Management’s Alternatives Solutions Group and co-portfolio manager of the new fund, said of the launch.
“The long/short equity managers we work with have already embraced ESG as part of their risk management,” Kramer added.
“They’re now focused on capturing sustainable alpha opportunities. They, like us, believe it’s possible to generate sustainable alpha and have a positive impact at the same time. They’re actually further ahead in their thinking than many of their peers. There’s still a lot of educating to do when it comes to hedge funds and ESG; something we remain focused on and are doing something about.”