Welton Investment Partners (Welton), an alternative investment manager specialising in non-correlated, actively managed strategies that incorporate quantitative expertise for maximum investor impact, has launched ESG Advantage offering investors a new way to integrate risk mitigation strategies to improve investor outcomes for sustainable investing in the public equities markets. The strategy seeks to elevate ESG away from market risk and beyond market-only performance and to deliver superior, uncorrelated returns over the longer-term in periods of market expansion and contraction.
“ESG Advantage is designed to provide investors with equity-like returns during bull markets and significant downside protection by mitigating systemic risk during a downturn,” says Basil Williams, CEO of Welton. “Over the last decade the large majority of ESG funds have underperformed the S&P 500 in part because they have failed to address systemic market risk. Our view is that ESG can and should do better.
Our insight was to combine an ESG equity portfolio with additional strategies that are capable of converting harmful equity portfolio risk factors into gains. This is exactly when ESG investors need them, and we believe it will lead to greater compounded growth overall.”
Whereas most ESG solutions are long only and tend to mitigate only idiosyncratic risk, such as company or industry-specific risk, ESG Advantage looks to minimise systemic market risk, as well. The strategy incorporates two of Welton’s quantitative models in new ways to both modulate market exposure and integrate uncorrelated multi-asset class strategies that can protect a portfolio in periods of economic contraction. At the same time ESG Advantage addresses idiosyncratic risk through the integration of best-in-class ESG data from leading providers.
Williams says: “What’s exciting is that ESG Advantage integrates highly refined quantitative investment strategies from Welton’s core offerings and that have demonstrated an ability to perform in down markets such as the most recent COVID-19 crisis. The building blocks for this already exist – we are essentially just reassembling the parts in new ways while integrating market-leading ESG data into a more capital efficient structure that aims to diversify risk in a traditional equity or fixed income portfolio.”
“The future of asset management requires a different way of thinking about portfolio design that maximises investor outcomes,” says Pat Welton, founder and Chief Investment Officer of Welton. “With ESG Advantage, we started by asking the question ‘can responsible investing be more responsible to the investor?’ We take the view that investors deserve ESG investment options that can be values aligned while also delivering less risk and potentially higher returns in a significantly more capital efficient way. By using our investment and quantitative expertise and applying them to ESG investing, we are able to unite several important investor goals into one strategy.”
