All our funds pursue different investment strategies and together form a well diversified portfolio in Brummer Multi-Strategy (BMS). In our search for new investment management teams to add to the group, we look for investment strategies which we believe will improve BMS’s ability to generate a competitive and sustainable risk-adjusted return over time.
Investing responsibly is about common sense. It is part of the duties of a portfolio manager to analyse relevant and material risks and opportunities regardless of whether they are classified as ESG factors or, say macroeconomic trends and political risk. The identification and integration of financially material ESG factors requires continuous learning. Relevant ESG scopes such as understanding climate change risk and opportunities and how those impact different assets and asset classes over various time-horizons is a never-ending challenge. As such, making well informed investment decisions is essential to our ability to achieve our goal of generating a sustainable and competitive risk-adjusted return over time. As Brummer & Partners encompasses different investment strategies and because our funds invest in different types of financial instruments, each fund’s approach to responsible investment needs to be adapted to its specific situation and circumstances.
Brummer & Partners AB and Brummer Multi-Strategy AB (the manager of BMS) have separate policies for responsible investment under which the various investment management firms in the group are requested to draw up their own policies and define what responsible investment means to them. The hedge funds in which BMS invests are supported by Brummer’s Sustainability and Risk Control teams. The group wide Sustainability team supports the investment managers with advice and recommendations relating to responsible investment and the Risk Control team monitors compliance with the policies on a quarterly basis.
BMS together with the other funds in the group have decided to exclude long and short investments in companies involved in controversial weapons and long investments in coal. The Risk Control team screens all funds against a third party ESG research provider (ISS-ESG) and their database quarterly to identify any holdings in such companies.
The funds are also screened for holdings which violate international standards on environmental protection, human rights, labour standards and anti-corruption. The purpose of the screening is not necessarily to encourage the funds to exclude companies which violate international standards. Instead, the Sustainability team engages in dialogue with the funds on the investments concerned and ensure that the chief investment officers are aware of the associated ESG issues and factor these into their analyses. There may be good reasons to invest in a red-flagged company, for example if management is aware of the problems and is taking action to address them, and this is expected to have a positive impact on the share price. Hedge funds also have the option of shorting a company, and companies with poor ESG records are typically short candidates for hedge funds. When a hedge fund shorts a company this sends a signal to management that the portfolio managers do not have confidence in the company.
Responsible investment tools:
- ESG integration where applicable
- Engagement with our funds on portfolio holdings
- Engagement with funds' portfolio holdings on ESG issues
- Exclusion of controversial weapons and long investments in coal