Leading absolute and relative performance
This week (September 2019), Tideway’s UCITS Funds mark important medium and longer-term anniversaries with competitive performance track records on both an absolute basis and versus their respective peer groups.
Of note is the 3rd / 82 ranking within the IA Strategic Bond sector of the £118 million GBP Hybrid Capital Bond Fund with + 21.87 % net return*, more than double the sector median. This fund has BB- minimum credit rating for credit and has been managed with a 5 to 6-year duration.
Consistent Investment process = Scope for repeatable returns
Peter Doherty, Tideway CIO and manager of the Tideway UCITS Funds said: “We work hard and invest for performance whilst managing downside risk. Our focus is on delivering secure income well ahead of inflation with room for capital growth and we have done that over the past three years.
“As we don’t take large interest rate bets nor do we buy Single B or lower credits, we believe that our returns are sustainable and repeatable, because they are not reliant upon special factors or one-off macro tailwinds.”
In mixed assets, the Tideway High Income Real Return Fund was relaunched in early 2019 to include an allocation to “Alternatives” such as property, infrastructure and structured finance. These have been achieved using closed-end funds.
Doherty added: “With an 8-year track-record delivering 47.81%*, the High Income Real Return Fund has recently been simplified to focus on what we do best - finding, analysing and investing in secure, good value assets delivering secure income well ahead of inflation whilst allowing room for modest capital growth.
“Our research-driven approach to analysing the credit and cashflow risk of Banks and Insurers who issue Hybrid Capital translates very well into the Alternatives’ markets.”
Looking ahead - Ethical Income
After several months of analysis, Tideway is in the process of finalising an ethical investment framework which will, soon apply to all the Tideway UCITS Funds.
“Tideway is setting out to be a leader in delivering Ethical Income,” said Doherty.
“Now is the time to develop and implement policies for the responsible allocation of capital to ensure that the widest possible group of constituencies are treated fairly by the businesses we invest in”.
In relation to responsible investing, Doherty said: “Two of the biggest issues facing investors today are:
(i) How am I going to meet my income requirements as bond yields continue to hit new lows?
(ii) How do I ensure that I am investing responsibly and not generating returns from businesses that are clearly acting irresponsibly on the environment, climate change and broader issues of human rights and ethic?
“In addition to the urgency of environmental challenges and climate change, we will pay careful attention to Labour rights, policies around Gender and Minorities and corporate ethics in the wider sense.”
“We see no need to give up on striving to deliver market leading returns in exchange for a robust and effective ethical investment policy. To the contrary - we see opportunities to maintain our performance whilst at the same time improving the average integrity of our portfolio companies.”
How big a change will this be for Tideway Funds?
In short, not a big change at all, but there will be improvements.
The current portfolios within the Tideway UCITS Funds already score well on ethical metrics as assessed by Arbaesque and Sustainlytics and other data providers such as Robeco. For example, the GBP Credit Fund weighted average Sustainlytics score of 23 is well below the Global Average of 26. Furthermore, the Carbon Emissions score of only 35.5 per Million USD invested is already below the 38 level of the dedicated RobecoSAM Euro SDG Credit Fund and a fraction of the 172 in the Robeco Index.
Good corporate ethics will be associated with strong financial results
Factors outside of the classic capital asset pricing model (CAPM) are becoming increasingly influential in stock market valuations, most notably, the need for positive Environmental, Social & Governance (ESG) considerations.
The rise of ESG investing can be viewed as a proxy for how markets and societies are changing and how concepts such as the role of a company in society are adapting to these changes.
Arabesque S Ray is an algorithm-based tool that analyses the sustainability performance of approximately 7,000 of the world’s largest listed corporations using self-learning quantitative models and data scores.
The technology systematically combines over 200 ESG metrics with news signals from over 30,000 sources across 170 countries.
It is the first tool of its kind to rate companies on the normative principles of the United Nations Global Compact: Human rights, labour rights, environment & anti-corruption (GC Score).
Sustainalytics’ ESG Risk Ratings, our next generation ESG ratings, are designed to help investors identify and understand financially material ESG risks at the security and portfolio level. ESG ratings are categorized across five risk levels: negligible, low, medium, high and severe. Ratings scale is from 0-100, with 100 being the most severe. ESG ratings coverage launched with 9,000 companies and has now expanded to cover 11,000 companies. Nearly 40 industry-specific indicators give investors a stronger signal into company performance.
Traffic Light System – Engage and Influence
An activity we will not invest in e.g. Weapons production
A company we will not invest in due to ethical considerations e.g. Bribery
A company with high Ethics scores, clear written policies and evidence of positive behaviour including any specific relevant areas for that industry
A company where improvements can be made in key areas. Tideway’s approach is to engage and communicate with companies in such situations with a view to influencing behaviour change.
Tideway’s approach to Ethical Income
Investing in Tideway UCITS Funds ICAV involves the risk of loss and there is no guarantee that all or any capital invested will be repaid. Past performance is no guarantee of future returns and the value of investments and the income they produce can fall as well as rise. Investors should make their own investment decisions based upon their own financial objectives and financial resources and, if in any doubt, should seek advice from an investment advisor.
Tideway Investment Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN: 496214). Tideway GBP Hybrid Capital Fund and Tideway GBP Credit Fund are sub funds of Tideway UCITS Funds ICAV. This ICAV is authorised and regulated by the Central Bank of Ireland. This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution would be unlawful under the securities laws of such jurisdiction. The funds are registered for distribution in the UK and Ireland.
Wednesday 4 September 2019