11th June 2020

3 minutes reading time

Blackfinch Asset Management Launches ESG-approved Adaptation Funds

Funds meet demand for ethical, outsourced investment

Following the launch of Blackfinch Asset Management, investment specialist Blackfinch Group launches four Adaptation Funds. The new multi-asset unit trusts signal Blackfinch Asset Management’s move into the retail investment space.

Since the amendment to Assessing Suitability in MiFid II, growing numbers of financial advisers are seeking optimal outsourced investment solutions, in order to cater to clients’ ethical investment concerns. Industry surveys and client feedback indicate that over half of financial advisers now use the third-party model, with managed portfolios, and four out of five expect the demand for Environmental, Social and Governance (ESG) propositions to increase.

The new funds have been developed to meet increasing demand from investors for solutions which are fully aligned with ESG considerations. This is alongside being structured to meet the ongoing requirement for diversification across markets, geographies and asset classes.

Blackfinch Asset Management’s current managed portfolio service (MPS) has been successfully providing actively managed investments that are global and diversified in nature through collective investment schemes. Alongside the MPS, the Blackfinch Asset Management Adaptation Funds also offer active management, with similar geographic and asset class diversity, but across a broader investment universe.

This includes investment trusts employing both active and passive management styles along with exchange-traded funds, bonds and equities. In constructing the portfolios, the managers develop a proprietary strategic asset allocation, and do not place undue bias on any single geographic region.

While the Adaptation funds are unconstrained in terms of exposure to asset classes, regions and styles, just as with the MPS the managers always work within each investor’s predetermined risk boundaries.

The funds’ ESG approvals also rest on the managers’ rigorous processes. They use the funds’ broader investment remit and flexible structure to include investments where a positive impact is clear. They employ positive screening, evaluating and investing in funds, and in turn firms, that are paying close attention to the impact they make on society and the environment. Any investments which do not meet the required ESG standards are screened out.

Of the four multi-asset funds, three have a minimum Consumer Price Index (CPI) plus total return target objective, while one has an income target of a net 3.5% per annum. This means that, like the MPS, investors will be able to easily measure outcomes against their investment goals. Furthermore, the CPI-linked targeted return also contributes to the wider investment focus. This is in contrast to many UK-based fund benchmarks which have a ‘home bias’ within their equity exposure.

As a retail product, the funds will be highly regulated, benefiting from the oversight of multiple third parties, and will also be accessible to advisers on a wide range of fund supermarket platforms. They will not be subject to VAT, or 10% loss reporting requirements. Other tax efficiencies include clients holding a single investment line and CGT liability only on the sale of units in the fund.

"  The Adaptation Funds enable advisers to offer an ESG-approved outsourced solution which brings the benefits of greater investment scope and regulatory parameters. The new offering allows us to blend active and passive management styles, recognising the strengths of both approaches, as part of meeting client and adviser requirements. Jason Williams, Head of Distribution at Blackfinch Asset Management

"  We believe in addressing our target market with straightforward, clear and transparent investment propositions. The Adaptation Funds are targeted and streamlined in terms of their ratings, structure, reporting and availability. This offering reflects our dual focus on aligning with advisers’ processes and aims alongside clients’ financial objectives. Richard Cook, Founder and CEO at Blackfinch