Market Review

The fund’s benchmark MSCI World Index rose +2.8% in January. It was a strong start to 2025 for investors, with both equities and bonds broadly delivering positive returns.

The US economy continued to show signs of strength with a positive jobs market and healthy GDP growth in the fourth quarter. President Trump’s promise of deregulation and tax cuts fuelled further optimism for shareholder returns.

However, the US market’s heavy tech concentration weighed on performance towards the end of the month. Chinese artificial intelligence (AI) company DeepSeek launched a surprisingly effective low-cost AI model, which raised doubts over the revenue prospects for AI models generally. The US tech sector is currently engaged in a very large investment programme to deliver AI, and this was suddenly called into question, negatively impacting many stocks in the sector.

Europe performed strongly as investors diversified from richly valued US tech in favour of European defensive and growth stocks. The region also benefited from tentative signs of improvement in eurozone macro data, and the eurozone composite Purchasing Managers’ Index (PMI) edged into expansionary territory during the month.

UK stocks, too, performed well with the FTSE All-Share up. With the majority of the Index’s revenue derived abroad, the sharp depreciation in sterling added a tailwind to the UK market.

Japanese equities lagged in January. The Bank of Japan (BoJ) hiked interest rates by 25bps, due to greater certainty regarding the outlook for wages and prices, which have been rising.

From a sector perspective, Communication Services was the top performer, followed by Financials and Healthcare, while Technology was the only sector to post a negative return.

Fund Review

The Fund delivered a positive performance of +3.3% over the month and outperformed the MSCI World Index.

NEXTracker, a leader in the solar tracker market, was the most significant positive contributor. The company reported strong 4Q24 results with a record backlog and a positive outlook despite macro headwinds. Uncertain prospects for the renewable energy sector under the new US administration remain a headwind for stocks in this sector, so NEXTracker valuation is very appealing.

Thermo Fisher, the life sciences tool company, performed well with strong 4Q24 results exceeding market expectations. The company emphasised a focus on profitability for 2025, boosting investor confidence and leading analysts to raise their price targets.

In contrast, however, Thermo’s life sciences peer Danaher was the largest detractor. The stock price fell in response to weaker-than-expected 4Q24 earnings and a cautious 2025 guide. One-off challenges in its Life Sciences and Diagnostics businesses are expected to weigh on early year sales.

Canadian company ATS Corp, a leading provider of automation equipment and services, was adversely affected by news of potential tariffs on Canadian imports imposed by the US government.

Overall, all themes contributed positively towards performance, with Health being the largest positive contributor.

Outlook

While the last few years have been difficult for WHEB and impact-led strategies in general, we believe we have good reasons to be optimistic regarding what’s to come.

Sentiment for impact investing is very low, matching the loss of political will to tackle these difficult challenges. We can see this clearly in the portfolio’s valuation relative to broader markets, which is now at historic lows.

At the same time, however, the urgency for climate action has never been greater, and the means have never been more economically attractive. 2024 had a series of extreme weather events (e.g., hurricanes Helene and Milton in Florida and storm floods in Valencia), while clean power costs (e.g., solar and onshore wind) are now well below fossil-fuel based alternatives. Electric vehicles also often beat their corresponding internal combustion engines option on a total cost of ownership analysis. This will enable an increasing number of environmental markets to grow independently of the political environment.

We are confident that most of the more strongly underperforming stocks in our portfolio have been hit by short-term issues the market is focusing on, that the fundamental, longer-term investment case is as sound as ever, and that valuations are more favourable.

Although President Trump does stand quite explicitly against much of the transition to a more sustainable economy, we observe that historically, the strong deregulatory agenda put forward by Republican administrations has tended to support the midcap stocks that our strategy is most exposed to.

We, therefore, remain excited about the future and convinced that the opportunity has never been greater.

A new home but an unchanged commitment to positive impact investing

By Seb Beloe

At the end of January, we announced that WHEB will be joining Foresight Capital Management. While WHEB will no longer be a fully independent business, the investment team, the investment strategy, and the brand will live on as part of a much larger group.

While there are aspects of being independent that we will miss (and we will sadly be leaving our lovely offices in Cavendish Square), we are also tremendously excited about the opportunities that joining Foresight will bring. We believe that as the market for sustainable and impact investing evolves, clients will want access to a broader range of products and asset classes backed by firms with established distribution, risk management and institutional backing. Within Foresight, we will be able to provide a more complete offering to clients in a way that would have taken us many years to build ourselves within WHEB.

Why Foresight?

In fact, WHEB has been looking for a strategic partner that can provide this broader platform for some time. We believe that Foresight is a superb partner for WHEB. First and most importantly, Foresight has a significant focus on impact investments. This includes renewable energy infrastructure, place-based private equity, and the nascent Foresight Capital Management (FCM), which focuses on liquid investment strategies of which WHEB will become a part.

As a well-funded bigger business with AUM of over £12 bn, the company has the ability to think long-term and invest counter-cyclically in impact investing. The acquisition of WHEB is a clear example of this.

On the business development side, Foresight has real strength. They have deep relationships in the independent financial advice (IFA) market as well as with local government pension schemes (LGPS). FCM itself has a distribution team of four, and we will also benefit from sales support across the wider Foresight business, which is ten times the size.

What does this mean for WHEB’s culture and brand?

Over the 16 years since its foundation, WHEB Asset Management has built a powerful reputation for authentic impact investing combined with radical levels of transparency. This approach will not change once we are part of Foresight. The investment strategy and personnel will not change, and our ambition to be leaders in impact investing in listed markets remains undimmed. Our hope is that by joining forces with FCM, we will be even better placed to deliver world-class strategies for our clients.

What practical changes will there be?

Our expectation is that clients will see very little change. The Pengana WHEB Sustainable Impact Fund and WHEB’s overseas-domiciled funds will not change their names, and the underlying strategies and investment teams that implement them will not change either. There will also be no change in investment focus. The WHEB team will be fully integrated into FCM. The WHEB partners will all be made Managing Directors who remain deeply committed to WHEB and heavily incentivised to lead the next phase of growth.

A final word

It has been quite a journey for WHEB Asset Management. We are hugely grateful for the support that our investors have shown us. We have sought to develop a fresh approach to impact investing both in terms of the depth of research that we do and in the transparency and reporting that we provide to clients. We hope that notwithstanding the vicissitudes of the stock markets, we have provided clients with investment products that have aligned with their values and met their needs.

The business launched in 2009 with no assets to manage and just three people, but also a new vision for what could be achieved. At the end of 2024, the WHEB team had grown to 20, and assets under management were just shy of £1bn. We have won pretty much every industry award available and were particularly pleased to be the first listed equity strategy to use the UK Financial Conduct Authority’s ‘sustainability impact’ label at the end of last year.

We are tremendously proud of what the team has done and the contribution that we have made over the past 16 years. We now look forward with real energy and excitement to the next chapter within Foresight, where, within a larger organisation, we will remain committed to WHEB’s original mission to advance sustainability and create prosperity through positive impact investments.