Perennial Partners has spun its ESG team and flagship ESG fund into a separate boutique investment business.
Perennial Better Future will include the Perennial Better Future Trust and the associated active ETF, the eInvest Better Future Fund (IMPQ) and will also manage ESG initiatives across the Perennial group.
The new boutique investment firm will be led by Damian Cottier, portfolio manager, with Emilie O'Neill as ESG and equities analyst, and George Whiting, who will head up the institutional and retail business development for the boutique.
It's really a coming of age to see the business investing into this because they believe in it and think it's a really important thing for us to be doing," Cottier says. "We will have a lot more engagement in allocation and resources going forward."
Perennial Partners' broader distribution team and 15 investment analysts will provide additional support to Perennial Better Future.
"We'll still work with the rest of the asset management business and they'll continue to work closely with us," Cottier notes.
O'Neill will remain within the investment analyst team, focusing on the Better Future strategy, she says.
"More of my focus will specifically be on ESG and the strategy, particularly given how aligned I am w/ the new boutique," she says. "ESG teams often sit outside the investment team, but with me sitting still in the investment teams, it also helps us integrate ESG into our broader modelling and portfolio management."
The intention will be to grow the Better Future business in future, but for the moment, the focus will be on the two products - the Better Future Trust and IMPQ.
Earlier this year, Perennial renamed the sustainable small cap equities fund the Perennial Better Future Trust. It was previously named the Perennial Smaller Companies Sustainable Future Trust.
Since its inception in 2018, the Perennial Better Future Trust has returned 13.3% per annum. It has outperformed the S&P/ASX Small Ordinaries Accumulation Index by 6.2% per annum and the ASX 300 Accumulation Index by 5.6% per annum since inception to the end of March 2021.
Cottier says the strategy is predicated on finding companies that derive the majority of revenue from positive outcomes, with zero revenue from harmful activities.
"We are focused on finding innovative smaller Australian companies. Many of the companies in the portfolio have entered into global markets and have significant growth potential - they are often disruptors in their chosen markets, improving health outcomes, increasing efficiency and reducing costs."
The Better Future Trust applies several screens to the portfolio - one screen is a minimum market cap of $50 million. Perennial then applies a negative screen, eliminating fossil fuels, alcohol, tobacco, weapons, forestry activities, gambling activities, and unhealthy fast food. The team then applies its internal ESG score to the resulting universe, which is typically 30-45 stocks.
The Better Future Trust has appeal to both institutional and retail audiences, Whiting says.
"Broadly, people come to a strategy like this for a number of different reasons, and we certainly feel that a strategy can offer different things for different investors," Whiting says. "It is an institutional quality product and we are seeing interest from the institutional landscape, but also very fitting to the retail and wholesale markets."
Perennial Better Future is speaking at the ESG Best Practice Forum on the topic of the current outlook and landscape for ESG products. To register, click here.