In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Claudia Quiroz, lead manager of the Morningstar 5-star rated Climate Assets Fund, Quilter Cheviot. The fund also has a Morningstar Quantitative Rating of Neutral.
Which Sector Shows the Biggest Promise in 2022?
The energy transition continues to offer the investment opportunity of our generation. In the context of energy security and independence, the Ukraine-Russia conflict has reinforced the need to invest in clean energy infrastructure and develop the right energy mix.
What's the Biggest Economic Risk Today?
Climate change is the biggest economic and environmental risk facing our world and is clearly already shaping the way we live, move and work. It is having a huge knock-on effect too with water becoming scarcer, food becoming harder to produce in some areas of the world and the health of nations deteriorating as rising temperatures push human capability. Without innovation and solutions to climate related challenges we put the global economy at risk.
Describe Your Investment Strategy
The Climate Assets strategy invests in companies that make a positive contribution to the world, with a strong underpinning of ethical values. It is multi-asset in nature and favours high quality medium and large companies to help reduce the volatility of returns. At the heart of our stock selection, there are five positive investment themes: Energy, Food, Health, Resource efficiency, Water.
Which Famous Investor Do You Admire?
Amy Domini. She was ground-breaking by launching the Domini Social Index in 1990, now the MSCI KLD 400 Social Index. She is the ‘D’ in KLD. Whilst very outdated today, I still have a copy of her book, Socially Responsible Investing: making a difference and making money. It was the first book I read on SRI.
Name Your Favourite "Forever Stock"
A stock with a management team with track record in execution, a strong balance sheet and leading position in the markets it operates. The safety equipment group Halma comes to mind.
What Would You Never Invest In?
Whilst our Climate Assets strategy is underpinned by our five positive investment themes, we also seek to avoid investing in companies that are generating revenue from controversial sectors of the economy, namely fossil fuels, gambling, mining, nuclear, tobacco and those breaching human rights. From a financial standpoint, we avoid unprofitable companies and the small and micro market cap segment.
Growth or Value?
Naturally running a sustainable investment strategy, developed under a centralised and robust investment process, I have a bias towards quality growth companies. These are often the ones with market leading positions, developing the solutions to the challenges of climate change. However, the recent pullback in markets has distorted the boundaries between value and growth. Also, even more traditional value companies are beginning to wake up to the issues we are facing and developing more solutions and services geared up to the green economy, making it is much easier to diversify across investment styles.
House or Pension?
As a wealth manager, I would always favour liquidity and diversification, so I would say pension. For many though, property is often the most valuable single asset. However, investing via a pension gives you greater potential to grow your wealth to retirement, while also providing additional diversification by not relying on a single asset class.
Crypto: Brilliant or Bad?
There isn’t enough understating about how these assets work and how they might behave in various economic environments. Also, given the off the charts volatility, one needs a very strong heart to invest in crypto. At the moment, they are certainly not suitable for your average investor, in my view.
How Can we Increase Diversity in Fund Management?
To get more people from non-traditional backgrounds interested in managing money, we need to provide clear and transparent pay structures, underpinned by strong policies to encourage returning to work after maternity leave or looking after the elderly for example. We need to aim to give everyone what they need to be successful, with the understanding that not everyone starts from the same place and needs the same level of support.
Take qualifications for example, we work in a heavily regulated industry thus any new applicants must do a huge number of exams just to get started. At Quilter Cheviot, we have rewritten our job descriptions to be more inclusive and no longer specify a need to have a particular grade or university degree. Thus, we are attracting diverse talent by expanding our recruitment pool and giving candidates of all backgrounds a better chance to be considered and succeed.
Have You Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Kingspan was a longstanding holding for the Climate Assets strategy, so to sell it after engaging with the company was a very disappointing outcome for us. We decided to divest after engagement on policies and systems relevant to the Grenfell fire accident. This is a good example, where a company may provide a solution to an environmental problem, like reducing energy consumption with building insulation, but failing our hurdle for the sustainable investment strategy. As we build out our team, we are increasing this type of focused engagement we carry out with the companies that we own.
What's The Best Bit of Advice You’ve Ever Been Given?
If you can’t understand it, don’t invest.
What Would You be if You Weren’t a Fund Manager?
As this is my second career, I can say that if I wasn’t a fund manager, I would have been a chemical engineer! I studied this at university in Argentina and worked in the industry for a few years before coming across to the UK to study for an MBA.
