In this series of short profiles, we ask top fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they would never buy.
Our interviewer this week is Claudia Quiroz, lead manager of Morningstar 5-star rated climate asset fund, Quilter Cheviot. The fund also has a neutral Morningstar Quantitative Rating.
Which sector shows the greatest promise in 2022?
The energy transition continues to provide the investment opportunity of our generation. In the context of energy security and independence, the conflict between Ukraine and Russia has reinforced the need to invest in clean energy infrastructure and develop the right energy mix.
What is the greatest economic risk today?
Climate change is the greatest economic and environmental risk facing our world and is already clearly shaping the way we live, move and work. It is also having a huge ripple effect with water becoming scarcer, food production becoming increasingly difficult in some parts of the world, and the health of nations deteriorating as rising temperatures push human capacities. 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 foundation of ethical values. It is multi-asset in nature and favors high quality medium and large companies to help reduce volatility in returns. At the heart of our stock picking are five positive investment themes: energy, food, health, resource efficiency, water.
Which famous investor do you admire?
Amy Dominic. It was revolutionary when it launched the Domini Social Index in 1990, today the MSCI KLD 400 Social Index. She is the ‘D’ of KLD. Although very outdated today, I still have a copy of his book, Socially Responsible Investing: making a difference and making money. It was the first book I read on SRI.
Name your favorite “Forever Stock”
A title with a management team with a track record of execution, a strong balance sheet and a leading position in the markets in which it operates. We think of the Halma safety equipment group.
What would you never invest in?
While our Climate Assets strategy is underpinned by our five positive investing themes, we also seek to avoid investing in companies that generate income in controversial sectors of the economy, namely fossil fuels, gambling, money, mining, nuclear, tobacco and those who violate human rights. From a financial perspective, we avoid unprofitable companies and the small and micro cap market segment.
Growth or value?
Naturally leading a sustainable investment strategy, developed through a centralized and robust investment process, I have a penchant for quality growth companies. They are often the ones who occupy leading positions in the market, developing the solutions to the challenges of climate change. However, the recent market decline has distorted the boundaries between value and growth. In addition, even more traditional value companies are beginning to recognize the issues we face and develop more solutions and services tailored to the green economy, making it much easier to diversify across investment styles.
House or Pension?
As a wealth manager, I would always favor liquidity and diversification, so I would say retirement. For many however, property is often the most valuable asset. However, investing through a pension gives you greater potential for wealth growth until retirement, while providing additional diversification by not relying on a single asset class.
Crypto: Brilliant or bad?
There is not enough understanding of how these assets work and how they might behave in various economic environments. Additionally, given the volatility off the charts, it takes a very strong heart to invest in crypto. At the moment, they are definitely not suitable for your average investor, in my opinion.
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 salary structures, underpinned by strong policies to encourage returning to work after maternity leave or taking caring for the elderly, for example. We must aim to give everyone what they need to succeed, knowing that not everyone starts from the same place and needs the same level of support.
Take qualifications for example, we work in a highly regulated industry so any new candidate has to pass a lot of exams just to get started. At Quilter Cheviot, we have rewritten our job descriptions to be more inclusive and no longer specify the need for a particular college degree or diploma. Thus, we attract diverse talent by broadening our recruitment pool and giving candidates from all walks of life a better chance of being considered and succeeding.
Have you ever engaged with a company and been particularly proud (or disappointed) of the result?
Kingspan was a long-time holding company for the Climate Assets strategy, so selling it after engaging with the company was a very disappointing outcome for us. We have decided to divest after our engagement on policies and systems related to the Grenfell fire. This is a good example, where a company can provide a solution to an environmental problem, such as reducing energy consumption by insulating buildings, but failing in our sustainable investment strategy. As we grow our team, we increase this type of focused engagement that we conduct with the companies we own.
What’s the best advice you’ve ever received?
If you can’t figure it out, 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 hadn’t been a fund manager, I would have been a chemical engineer! I studied this at university in Argentina and worked in industry for a few years before coming to the UK to study for an MBA.