Faced with the recent strong growth of demand for sustainable investing products, the question can be asked: are fund distributors able to keep up with asset managers in equipping themselves to deliver what such investors are seeking? One participant at the recent ALFI Global Distribution Conference expressed some doubt.
“I have the impression that distributors are slightly lagging, as compared to the asset manager, the manufacturing side of this industry,” said Stéphane Corsaletti of Allfunds, which describes itself as the leading European fund distribution platform. “And therefore, it’s the right moment for distributors to get equipped in order to bring that transparency that is required by the end clients and that is needed further accelerate the penetration of ESG solutions.”
Old recipes?
Corsaletti was speaking at a panel discussion of three fund distribution professionals moderated by PwC partner Steven Libby and entitled “Distributing ESG and impact investment solutions: do old recipes still work?”
The panellists emphasised the strong importance of ESG investing for their businesses and explained the special efforts they were making to support ESG investing. For example, Micaela Forelli of M&G Investments explained that “M&G is committed to evolving as many strategies, as many investment services as possible across our ranges of products towards ESG, sustainability or impact outcomes.” As an example, she mentioned the creation of a team called M&G Catalyst, which has a mandate to invest £5 billion in private assets in sustainable and impact investments.
More evolution
Campbell Fleming of The Big Exchange (photographed) was asked whether he thought fund distribution should change. Replying in the negative, he said “I think we just have to do more of the evolution that we’ve been doing.”
The Big Exchange, which is billed as “the UK’s first impact investment platform”, which offers 60 independently curated and rated funds, was launched with the support of The Big Issue, a newspaper that is distributed by homeless people in the UK as a way of giving them small business experience.
Asked about the complexities of the rules that distributors had to work under when dealing in ESG investments, Fleming pronounced that he was “a principles-based guy, as opposed to, let’s measure everything and regulate everything.” Citing a statistic that 67% of UK investors want to invest with impact, but don’t know how, he said that “what they’re saying to the industry is that we would like products that are intuitively understandable,” and said that industry and regulators are out of step with that desire.
Positive views
The other two panellists were more positive about the EU’s Sustainable Finance Disclosure Regulation (SFDR). Corsalletti of Allfunds pointed to how until “two-three years ago” the main basis of an ESG fund was its name. He said the SFDR had “dramatically improved” the situation. “To me, the next step is to get … to a point where a distributor will take ownership of assessing the ESG nature of a product that they sell into their distribution network.”
He went on to discuss the need to make the demand for ESG products “more robust, more sustainable over the long run.” He explained that he saw that now, “the growth of ESG products, which is extremely impressive, still mostly comes from a kind of supply effect – distributors want to put these products on their shelf.” He said that this creates customer demand and growth. But he expressed his view that “it’s super-important that end clients can really measure the alignment between the objectives of the funds they invest in and what they see in their private lives, the fact that there are those big challenges on the environmental and social scene.”
Forselli of M&G explained the new client demands with an analogy to “having new and different gates to pass through.” Since the arrival of the SFDR and its classifications, “we in the asset manager capacity have to make available more data, in order to allow for transparency and comparability, which is the ultimate game that the European authorities have asked our fund industry to come towards,” she explained. “So it’s a matter of not only covering the basics, but also looking into value added and what we can explain more.”