Analysis of the Fund CT (Lux) Sustainable Global Equity Enhanced Income

This is a recently launched fund by Columbia Threadneedle, domiciled in Luxembourg, and follows a sustainable philosophy. Its objective is to achieve income combined with long-term capital growth (at least 5 years). To achieve this, the fund combines a core equity component with a derivatives strategy to enhance income.

The core equity component primarily invests in companies worldwide, of various sizes and across different industries or economic sectors, adhering to the fund's sustainable investment criteria.

Now, the fund's sustainable investment criteria have been specified by its investment policy and include: Exclusion Criteria (Avoid), Investment Criteria (Invest), and Improvement Criteria (Improve).

The fund:

Excludes: Investments that go against the goal of contributing positively to society and/or the environment. For example, companies deriving revenues from certain industries such as Weapons, Tobacco, Fossil Fuels, among others, are excluded. Additionally, there is constant monitoring to prevent portfolio companies from falling into the avoidance criteria.

Invests: In companies that offer sustainable solutions or make positive contributions to society and/or the environment. The team has identified 8 themes through which they seek companies that stand out, including Advances for Connection and Protection, Digital Empowerment, Energy Transition, Health and Well-being, Resource Use Efficiency, Sustainable Cities, and Financial Sustainability.

Improves: The fund's team uses its investor position to engage in dialogue on issues that pose a potential threat to long-term value and also represent an opportunity. The goal is to mitigate risk, support long-term profitability, and contribute to a more sustainable world by encouraging better management practices in the companies it invests in.

In summary, regarding its investment process, the fund has a long-term objective. Given the ESG focus of the portfolio, current efforts by companies to improve their impact on these criteria will yield their greatest results in the long term (at least 5 years). Additionally, this fund is concentrated (30 to 50 instruments), a result of the team's selective investment process and its special focus on Exclusion, Selective Investment, and Engagement.

The investment team consists of experienced investors, led by Nick Henderson, who joined the Columbia Threadneedle team through the acquisition of BMO GAM (EMEA) in 2021, having been with BMO since 2008. Today, Nick Henderson leads and supports other Sustainable funds within the firm, allowing him to maintain a focus on company selection and the necessary expertise to engage with them.

Despite the fund's recent launch, as of the end of November 2023, this strategy had over $500 million USD in assets under management.

Performance of the CT (Lux) Sustainable Global Equity Enhanced Income Fund

The fund doesn't have enough history to display indicators of past performance. It will be necessary to wait a bit to see its numbers compared to its benchmark (MSCI All Country World NR Index). Nonetheless, it's worth mentioning that the fund is actively managed, meaning the fund's team considers the benchmark for comparison purposes to review performance, but the fund is not constrained by this benchmark. Thus, the team has the freedom to invest in a portfolio that may be materially different from the index's own composition.

The core equity component of the fund, which seeks to provide an income return higher than the Index over renewable 3-year periods, net of expenses. The manager aims to increase this income by 2-4% by applying an active derivatives strategy that the manager deems appropriate.

Conclusions

The CT (Lux) Sustainable Global Equity Enhanced Income Fund is a sustainability-focused fund that invests in companies globally, set to benefit from their current efforts in Environmental, Social, and Governance (ESG) criteria. Additionally, it employs a derivatives strategy, allowing it to generate additional returns for the overall portfolio, actively competing with other global equity funds that may not consider these criteria.