East Capital?s new Sustainable Emerging Markets Fund leverages proprietary ESG for alpha

By Roger Aitken — East Capital, an independent asset manager specializing in emerging and frontier markets that manages €2.7 billion (c.$3.08bn/£2.38bn) in public and private equity funds, real estate funds and separate accounts for an international client base, is launching its new Sustainable Emerging Markets fund. It brings together what is touted as the “best long-term and sustainable” stock-picking ideas from around the globe into a single dedicated vehicle. 

 

The launch of East Capital Sustainable Emerging Markets on 30 June by the Swedish firm that was founded in 1997 is coinciding with the company’s 20-year anniversary. Today the Stockholm-headquartered firm in Kungsgatan has office presences in Dubai, Hong Kong, Luxembourg, Moscow, Oslo and Tallinn.

 

Benchmarked against the MSCI Emerging Market Index and with capital provided by Nordic institutional investors, the new fund will be available to institutional and retail investors in most European countries from the outset. The new strategy will pursue an “unconstrained approach” to investing broadly across sectors, countries and market capitalizations.

 

At launch the unit price for all share classes in the Sustainable Emerging Markets fund, an open-ended fund, will be 100 (Euro, US dollar and Swedish Krona). There are several different share classes for retail and institutional clients denominated in the different currencies. 

 

Registered for sale in Sweden, Norway, Finland, the Netherlands, UK, France and Germany, registration for European territories covering Austria, Italy and Switzerland is in pipeline but has yet to be finalized.

 

Peter Elam Håkansson, Chairman and CIO of East Capital who will manage this Luxembourg-domiciled UCITS fund, commenting said: “Twenty years ago East Capital set off to be a long-term, active and responsible investor, based on Nordic values. Since then, we have seen the world and our investment universe changing.”

 

The Swede, who holds an MSc in Finance from Stockholm School of Economics and has studied at EDHEC in Lille, added: “Today we believe more than ever that companies embracing sustainable practices will enjoy competitive advantages. The most interesting investment ideas are outside of extractive industries - and we applied this principle as far back as two decades ago in Russia.”

 

Alongside Håkansson the fund is backed by portfolio managers Adrian Pop and Francois Perrin in Hong Kong as well as Louise Hedberg, Head of Corporate Governance and Sustainability at East Capital. 

 

The fund will invest in companies characterized by high growth potential and strong Environmental Social Governance (ESG) profiles, with a clear overweight in themes relating to domestic growth and the emerging consumer. 

 

It is understood that the strategy will also seek investments in renewable energy and other fast-growing clean technologies. Off-benchmark exposure includes selective allocation to frontier markets and China A-Shares, Chinese companies listed on the exchanges in Shanghai and Shenzhen.

 

With ESG fully integrated in East Capital’s investment process to produce enhanced investment decisions with lower risk, the goal is to deliver a higher return for unit holders. Proprietary and locally sourced ESG data will be deployed for alpha generation capability.

 

Commenting further Håkansson said: “We have always seen an active approach to sustainability as a natural and important part of our investment process as ESG offers insight to both risks and opportunities.” 

 

He added: “China’s war on pollution has set an unparalleled investment program going, which has created one of the largest markets globally for companies providing solutions to sustainability related challenges, companies that this fund will invest in.” 

 

Further information on the fund including the prospectus is being made available at launch, which can be accessed via www.eastcapital.com.