DBS Private Bank weighs in on thematic funds

Industry Interviews

The bank is careful with themed funds, though it invests in two sustainable-themed products.

Pierre DeGagné, DBS Private Bank

Thematic products have become popular in Asia, with a number of fund managers, including Allianz Asset Management, UOB Asset Management and Value Partners, preparing to launch them in the region. BNY Mellon Investment Management has also been active in the space, launching in Hong Kong and Singapore its Mobility Innovation strategy in November after raising $2bn in assets in Japan for the same strategy.

Investors in Hong Kong have been persuaded. Although equity funds had net outflows of $1.9bn during the first 10 months of last year, sector or thematic products had net inflows of $867.3m, according to a Cerulli report.

However, for DBS Private Bank, funds that revolve around specific themes are among the products that it avoids, Pierre DeGagné, Singapore-based head of fund selection, told FSA in a recent interview.

Taking sustainable investments as an example, the bank steers away from specific thematic concepts, DeGagné said, but declined to name any funds.

"We don’t wish to get pulled into some sort of marketing claim. We go beyond just screening for ESG concepts"

According to FE data, examples of sustainable-themed products include at least three separate water-focused funds from Robeco, Pictet Asset Management and BNPP AM affiliate Impax Asset Management.

“Broad themes, such as environmental innovation, for example, are great. But I generally avoid buying one specific area as there isn’t flexibility or adaptability to change as investment opportunities evolve,” said DeGagné.

The same applies to technology-related products.

“If someone is saying, let’s look at the broad innovations out there that are empowering people and providing access not only to financing but also education or medical health, that is great, because there is always going to be opportunities that you can rotate around.”

Sustainable investments

DeGagné did provide examples of sustainable products the bank invests in.

“We don’t wish to get pulled into some sort of marketing claim. We go beyond just screening for ESG concepts and instead, seek to identify broad-based funds with a focus on innovation and have sustainable competitive advantages that make them more likely to outperform their given benchmarks.”

DBS likes the Parvest Global Environment Fund, which is sub-advised by Impax Asset Management, given its broader remit.

“It invests globally in companies that can profit from innovating environmental technologies across different sectors, including water, agriculture, waste and energy solutions,” he said, adding that the product has the capacity to rotate across sectors.

The bank also invests in the Wellington Global Impact Fund, which is a social impact fund with a broader remit, he added.

“It has an orientation to emerging markets where many of the world’s biggest social challenges are concentrated.”

Both funds were hit in 2018, but DeGagné remains positive on the long-term potential.

“We are excited about the global secular trends that will underpin long-term growth that can benefit the society and environment, and believe this short-term volatility presents a great entry point into both products.”

DeGagné added that it has other ESG-integrated equity strategies on its platform, which include the First State suite of Asia ex-Japan funds and the BNY Long-Term Global Equity strategy run by Scotland-based BNY Mellon IM affiliate Walter Scott & Partners.

The bank continues to explore new ideas and is expanding its ESG platform “modestly”.

On Monday, FSA will run part 2 of the interview, which focuses on the DBS fund selection process.

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