It was unfortunate timing for Osmosis with the launch of their first exchange traded fund. It has not been a good time to be in equities generally and the fund was down 26% on the year. This did not help in getting market penetration and this is what the tie up with L&G should do. L&G are a well know passive manager, with significant distribution channels and this is their first movement into environmental markets.
The L&G fund is a passively managed fund aimed at profiting from the evolution to a lower carbon economy. There are two major differences with Osmosis previous offering, firstly this is a unit trust and not an exchange traded fund and secondly the annual management charge rises from 0.7% with no adviser commission to 1.25% with a 0.4% trail payable to advisers.
Osmosis is an independent specialist investment firm with a deep understanding of environmental factors and how they impact investment portfolios. The Global Environmental Enterprises Fund uses the Osmosis Climate Solutions (OCS) Index as the basis of its portfolio.
The L&G fund aims to provide capital growth primarily through investment in companies that are profiting from the global response to energy scarcity, pressures on natural resources and the shift to a lower carbon world economy.
Simon Ellis, Managing Director of Legal & General Investments, said: “We are launching the Global Environmental Enterprises Fund to allow investors to invest at the right price in one of the major investment themes of this decade. Across the world, companies are delivering growth and value in sectors such as low carbon energy production, energy efficiency, waste management and water use.”
“These dynamic and rapidly growing markets create current annual revenues estimated at over $700 billion, forecast to grow to $2.2 trillion by 2020, according to market estimates. We term the companies in this universe as ‘global environmental enterprises’.” Ellis added.
Osmosis has been building up a global database, over five years, of all companies in the environmental sector. A company will only be eligible if it is generating at least 50% of revenue from any one of the follwoing three themes:
- energy efficiency and energy management
- low carbon energy production
- water, waste and pollution control
It is weighted by sector rather than by market capitalisation which gives the portfolio a broad, globally diversified, thematic exposure. "The fund is ultimately a global equity fund," Simon Ellis adds. "There is no top-down asset allocation done - although it is a happy coincidence that there’s significant geographical diversification because different countries tend to favour a different environmental theme."
June Aitken, CEO of Osmosis Investment Management, said: “We are very excited to partner with Legal & General Investments on this fund. The fact that Legal & General Investments is committed to a fund that identifies efficient solutions to environmental issues is evidence that this space is no longer niche, but a significant investment opportunity.”
Osmosis is actively managing the index. L&G are tracking that index. Robert Dowling, who is in the L&G index team, will execute portfolio changes on a minute-by-minute, day-by-day basis.