Fund Name | SRI Style | Product | Region | Asset Type | Launch Date | |
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Royal London Short Term Fixed Income Fund |
Limited Exclusions | OEIC/Unit Trust | UK | Cash (or =) | 15/06/2011 | |
As at: 31/12/23 |
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OverviewAwaiting update from fund manager - fund last updated March 2022
The fund has an ethical overlay. Our ethical investment process begins with screening for eligible investments, which is conducted by specialist independent consultancy MSCI, a leading provider of research into the environmental, social and governance (ESG) and ethical performance of companies. This fund invests in short-dated and cash instruments like floating rate notes (secured on pools of residential mortgages) and certificates of deposit. All of our investments are with large, mainstream banks and financial institutions. However, we have undertaken an ESG review of the financial counterparties we have invested in to identify any high-level ESG risks that could affect the safety, security or viability of these cash investments. This includes reviewing issues like governance, cyber security, mortgage, and other underwriting standards, customer service and complaints, and controversial business activities. |
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FiltersFund informationSustainabilityEncourage more sustainable practices through stewardship Climate Change & EnergyEncourage transition to low carbon through stewardship activity Ethical Values Led ExclusionsTobacco and related product manufacturers excluded Armaments manufacturers avoided Governance & ManagementEncourage higher ESG standards through stewardship activity How The Fund WorksNegative selection bias Focus on ESG risk mitigation Fund management company informationAbout The BusinessESG / SRI engagement (AFM company wide) Responsible ownership / stewardship policy or strategy (AFM company wide) Responsible ownership / ESG a key differentiator (AFM company wide) Vote all* shares at AGMs / EGMs (AFM company wide) Diversity, equality & inclusion engagement policy (AFM company wide) Sustainable property strategy (AFM company wide) Integrates ESG factors into all / most fund research In-house diversity improvement programme (AFM company wide) ResourcesIn-house responsible ownership / voting expertise Employ specialist ESG / SRI / sustainability researchers Use specialist ESG / SRI / sustainability research companies Collaborations & AffiliationsPRI signatory UKSIF member Climate Action 100+ or IIGCC member Fund EcoMarket partner UN Net Zero Asset Owners / Managers Alliance member AccreditationsUK Stewardship Code signatory (AFM company wide) PRI A+ rated (AFM company wide) Engagement ApproachRegularly lead collaborative ESG initiatives (AFM company wide) Company Wide ExclusionsReview(ing)carbon / fossil fuel exposure for all funds (AFM company wide) Controversial weapons avoidance policy (AFM company wide) Climate & Net Zero TransitionEncourage carbon / greenhouse gas reduction (AFM company wide) Net Zero commitment (AFM company wide) Working towards a ‘Net Zero’ commitment (AFM company wide) Carbon transition plan published (AFM company wide) ‘Forward Looking Climate Metrics’ published / ITR (AFM company wide) Carbon offsetting - offset carbon as part of our net zero plan (AFM company wide) In-house carbon / GHG reduction policy (AFM company wide) Publish 'CEO owned' Climate Risk policy (AFM company wide) Net Zero - have set a Net Zero target date (AFM company wide) Voting policy includes net zero targets (AFM company wide) TransparencyPublish full voting record (AFM company wide) Publish responsible ownership / stewardship report (AFM company wide) Full SRI policy information on company website Full SRI policy information available on request |
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PolicyRLAM’s ethical framework combines the avoidance of companies involved in excluded activities with the identification of best of breed companies in permitted sectors. Companies that generate over 10% of their turnover from either one or a combination of the following categories are excluded:
Also, this threshold is deemed to be realistic and appropriate in terms of assessing a company, given that it may not be possible to always pinpoint the exact turnover derived from an excluded activity. This threshold ensures that a minimum of 90% of each holding meets the ethical criteria. |
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ProcessInvestment team RLAM’s investment team of fund managers and analysts work in a close and highly collegiate environment designed to encourage the free flow of thoughts and ideas across the team. The nature and size of the team enables new ideas and opportunities to be discussed freely. The close proximity of all members of the team allows agreed decisions to be implemented quickly, ensuring that all portfolios benefit from relevant new ideas with minimal delay. The individual fund managers consult with other team members and credit analysts in on-desk discussions. The Cash and Rates team and the rest of the Fixed Income team are central to the research process. The decisions to trade individual securities are made by the lead fund managers. This process ensures quick implementation of all buy/sell decisions. In addition, individual stocks are reviewed during the weekly off-desk team meeting. All investment decisions must fit within the team’s overall views. Portfolio construction Cash The portfolios only invest in straightforward, highly liquid instruments issued by a wide range of highly rated banks. This diversification spreads the credit risk and provides greater security for investors in the funds. All banks have the minimum of an A1, P1 or F1 rating from the major ratings agencies. We monitor the ratings of all of the institutions we lend to on a real-time basis by subscribing to Standard & Poor’s, Moody’s and Fitch’s online ratings services. Any credit changes are notified to us immediately, ensuring the funds maintain the highest credit quality. Government Bonds The portfolios may invest in UK government bonds (gilts and index linked gilts). Investment in short and medium-dated government bonds allows the managers to take advantage of opportunities to capture short-term movements in the government bond yield curve and bond prices, in order to achieve higher overall returns. Management of gilts follows a top-down process, but we believe significant value can be added through stock selection. Our investment approach for UK government bonds encompasses two elements:
Covered Bonds The funds may invest in covered bonds when thought appropriate by the managers. Issued by financial institutions, these bonds are asset backed, most often by a pool of mortgages. These highly liquid securities are regulated in the UK by the FCA and are exempt from being bailed-in. Corporate Bonds, Sovereigns and Supranationals The funds may also invest in Floating Rate Notes (FRNs) and short-dated bonds issued by banks and building societies with a minimum credit rating of AA- for the Cash Plus Fund and investment grade for Enhance Cash Plus. Sovereign and supranational bonds may be held and would be rated AA or above for the Cash Plus Fund. Our credit analysis process is characterised by a focused team of experienced investors working together by utilising an efficient and disciplined approach to analysing the investment universe. We separate portfolios into four issuer categories, each requiring a different analytical approach depending on the degree of operational and financial volatility the issuer exhibits, and the extensiveness of external research coverage the issue receives. Our philosophy leads us to place a higher degree of emphasis (relative to our peers) on analysing the covenants and security that protect our investors in a default scenario. Only then can we be fully confident that we are being well compensated for taking credit risk. There is high degree of interaction and cohesiveness within the Credit team in analysing credit bonds. Our size allows decision making to be efficient, informal, and dynamic. ABS and MBS The Royal London Enhanced Cash Plus Fund may buy securitisations with a credit rating of AA- or better, which will typically be secured against prime residential mortgages or commercial property. This pool of high quality assets combined with strong covenants or rules help to protect bondholders in the event of default. We think this is a safer and more efficient way to increase yield whilst mitigating risk within the fund. Asset allocation Allocation across the permitted asset classes is largely driven by the risk/return profile of the funds in relation to their Fitch Rating. This rating reflects high quality debt in the underlying holdings, and a low volatility to market risk. Recent process changes Our overall investment process and philosophy has remained unchanged over time, and continues to deliver strong returns for our clients. We believe that volatility in government bond markets is likely to persist and that, as an active manager, RLAM can take advantage of pricing anomalies. ESG Integration Our team’s approach to ESG integration is a 4-step process which comprises ethical exclusion criteria, quantitative and qualitative analysis, and engagement.
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Resources, Affiliations & Corporate StrategiesRLAM has an in-house team consisting of 11 Responsible Investment (RI) professionals that are a dedicated resource for implementing our stewardship and responsible investment activity by directly supporting front office teams to integrate material ESG research into investment processes. The RI team is led by Head of Responsible Investment who reports to the Chief Investment Officer (CIO) and is a member of the Front Office leadership team. RLAM’s Investment Committee however has ultimate responsibility for setting RLAM’s risk appetite and reviewing our strategic risks. Our Chief Investment Officer is a regulated Senior Management Function (SMF) and is the Executive team member that is accountable for setting the investment strategy, and overseeing our Responsible Investment function, including our approach to stewardship and climate investment risk. The CIO, with support from the investment teams, updates the Investment Committee and monitors responsible investment in line with RLAM’s risk tolerance threshold. The CIO is also responsible for ensuring responsible investment, stewardship and climate change risk management is embedded across RLAM’s investment strategies. The CIO is a member of RLAM’s Executive Committee and chairs the Investment Committee. UN PRI RLAM has been a signatory to the United Nations Principles for Responsible Investment (UN PRI) since 2008. As a result of our membership status, we commit to submitting and publishing our annual assessment response to demonstrate adherence to the principles. Our summary scorecard as at 2020 has been provided below. These scores are a testament to our continued efforts to become leading in responsible investment. We are engaging with the PRI to understand the current changes to its methodology and how we might need to adapt our practices to capture the required information according to these changes going forwards.
Stewardship Code For a long time, we have been a tier one signatory of the 2016 UK Stewardship Code. That is why we wanted to be early adopters of the 2020 UK Stewardship Code, following its release in October 2019. After implementing the new reporting standards set by the FRC in our 2020 Stewardship report, a year earlier than required, we received highly positive feedback from the FRC and were featured as examples of best practice throughout the FRC’s Review of Early Reporting. We were recently recognised as official signatories to the Financial Reporting Council’s UK Stewardship Code 2020. This follows the submission of our Stewardship and Responsible investment 2021 report (covering our stewardship and responsible activities in 2020) earlier this year. RLAM is also member of:
RLAM signed the “Net Zero Asset Management initiative” in March 2021. This follows the Royal London Group commitment to the net zero investment framework earlier in the year. The Net Zero Asset Managers initiative launched in December 2020 and aims to galvanise the asset management industry to commit to a goal of net zero emissions.
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DialshifterOur organisation is helping to support the Paris Climate Agreement and the Race to Net Zero by… …committing to reduce greenhouse gas emissions across our investment portfolio of at least 50% by 2030, and net zero by 2050. While we continue to develop our Climate Transition Plan, in line with the IIGCC Net Zero Investment Framework, we seek to mitigate climate investment risks in three ways:
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Literature
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05/05/2024