For the month ending 30 November 2019, the Fund returned +6.7% compared to the MSCI World Net TR Index (AUD unhedged) which returned +4.7%.
In November, our Health theme continued its recovery path having had a challenging time for the first nine months of the year. As expectations for improved trade relations grew, we also saw strong performance from our Resource Efficiency and Sustainable Transport themes.
In November, our Health theme continued its recovery path having had a challenging time for the first nine months of the year. As expectations for improved trade relations grew, we also saw strong performance from our Resource Efficiency and Sustainable Transport themes. On the other hand, our Cleaner Energy performed poorly.
Within the Health theme, affordable health cover provider Centene was again the major positive contributor. Concerns over major policy disruption in the US healthcare system retreated. Democratic presidential candidate Elizabeth Warren said her move to greater government coverage would be more gradual than previously supposed.
Varian and Icon were another two strong performers within the theme. Cancer treatment company Varian provided bullish long-term outlook on its Investor Day. The company aims to accelerate penetration in emerging markets through artificial intelligence and software-enabled services. It also plans to scale up its interventional oncology business. Icon helps to support clinical research. The pace of pharmaceutical research continues to be formidable and Icon is taking at least its fair share of this burgeoning market.
Resource Efficiency was another strong theme in the month with strong contributions from Ansys and Spectris. Ansys is a global leader and innovator of engineering simulation software. Its software help engineers understand and reduce environmental impacts in product and manufacturing process designs. It delivered stellar results which exceeded market expectations. Spectris makes highly specialised measuring instruments and controls which are used in manufacturing to enhance productivity, reduce downtime and improve efficiency. The company is going through a portfolio re-organisation process and the process is progressing as planned.
Our Sustainable Transport theme also did well in the month. Wabtec, a global leading supplier of railway equipment and locomotives, was a key contributor. It delivered solid results despite a weaker freight environment. Norma, another good performer, sells connecting systems primarily used in automotive emission control systems and water treatment systems. The company has had a tough patch of low growth and margin erosion. But it is a quality operator and is fighting back with some thoughtful restructuring programs.
Our Cleaner Energy theme performed poorly with turbine blade-maker TPI Composites being the worst contributor. The wind industry is upgrading its technologies faster than expected, and TPI needs to upgrade its manufacturing lines to produce longer wind turbine blades. This change slows growth and hits margins. As a result, the company removed its long-term guidance until there is better visibility. We wait to hear what their new outlook will be.
Seb Beloe – Partner, Head of Research
The current General Election campaign in the UK is unusual in many ways including the emergence of climate change in the political mainstream.
Concern about the environment is now at the highest level on record. 27% of UK voters cite the environment as one of the top three issues that concerns them[i]. While still behind Brexit and health, this is ahead of crime and the economy. The environment is even more important to younger voters. 45% of 18-24 year olds put the environment as their second biggest concern after Brexit. This picture is reflected globally: 68% of people across 26 countries see climate change as a major threat to their country[ii].
Watching the television debates and panel events, many politicians appear to be relative novices on these issues. This stands in clear contrast to the in-depth approaches taken by many in the private sector. Many of WHEB’s portfolio businesses have already set out detailed targets. CVS Health, DSM, Johnson Controls and Kingspan have had these targets endorsed by The Science Based Targets initiative[iii]. Kingspan, an insulation business, has set itself a target to get all its energy from renewables by 2020[iv]. The company is also set to benefit enormously from efforts to upgrade the energy efficiency of buildings in the UK and elsewhere.
WHEB Asset Management recently announced our own commitment to be a Net Zero Carbon (NZC) business by 2025[v]. As an office-based business this commitment is relatively straight-forward. Just as important, we are also committed to pushing our portfolio companies to do more, and to do it more quickly[vi].
In our view, much of the private sector is well ahead of the UK political parties on climate change. Concern among the general public has persuaded most parties to upgrade their commitments. If these commitments are kept, the UK will have to take radical action to tackle climate change whoever wins the election. The next five years will be critical – and this election will set the UK’s course in that time. As the ex-Labour Minister Alan Simpson put it at a recent event, “What happens in the next Parliament determines everything.”
i https://www.thealternative.org.uk/dailyalternative/2019/11/16/climate-election-polls-yougov
ii https://www.pewresearch.org/fact-tank/2019/04/18/a-look-at-how-people-around-the-world-view-climate-change/
iii https://sciencebasedtargets.org/
iv https://www.kingspan.com/group/about/sustainability/net-zero-energy
v http://www.whebgroup.com/wheb-commits-to-be-a-net-zero-carbon-business-by-2025/
vi For example we are a founder member of the Net Zero Carbon 10 initiative (https://p1-im.co.uk/research-articles/net-zero-carbon-10-nzc10/)
Partner, Head of Investment
Partner, Head of Research
The Pengana WHEB Sustainable Impact Fund invests in companies with activities providing solutions to sustainability challenges. WHEB have identified critical environmental and social challenges facing the global population over coming decades including a growing and ageing population, increasing resource scarcity, urbanisation and globalisation. The Fund invests in companies providing solutions to these sustainability challenges via nine sustainable investment themes – five of these are environmental (cleaner energy, environmental services, resource efficiency, sustainable transport and water management) and four are social (education, health, safety and well-being). WHEB’s mission is ‘to advance sustainability and create prosperity through positive impact investments.’
1. From August 2017, performance figures are those of the Pengana WHEB Sustainable Impact Fund’s class A units (net of fees and including reinvestment of distributions). The strategy’s AUD performance between January 2006 and July 2017 has been simulated by Pengana from the monthly net GBP returns of the Henderson Industries of the Future Fund (from 1 January 2006 to 31 December 2011) and the FP WHEB Sustainability Fund (from 30 April 2012 to 31 July 2017). This was done by: 1) converting the GBP denominated net returns to AUD using FactSet’s month-end FX rates (London 4PM); 2) adding back the relevant fund’s monthly ongoing charge figure; then 3) deducting the Pengana WHEB Sustainable Impact Fund’s management fee of 1.35% p.a. The WHEB Listed Equity strategy did not operate between 1 January 2012 and 29 April 2012 – during this period returns are zeroed. The Henderson Industries of the Future Fund’s and the FP WHEB Sustainability Fund’s GBP net track record data is historical. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance. The value of the investment can go up or down.
2. The Fund incepted on 31 October 2007 as the Hunter Hall Global Deep Green Trust. The Fund was relaunched on 1 August 2017 as the Pengana WHEB Sustainable Impact Fund employing the WHEB Listed Equity strategy. This strategy was first employed on 1 January 2006 by the Henderson Industries of the Future Fund and currently by the FP WHEB Sustainability Fund.
3. Annualised standard deviation since inception.
4. Relative to MSCI World Total Return Index (net, AUD unhedged)
* For further information regarding fees please see the PDS available on our website.
