Tilney Sustainable MPS has added positions in the JPM Global Macro Sustainable Fund and The Renewables Infrastructure Group (TRIG) as it seeks to increase exposure to alternatives to diversify risk and reduce volatility amid the uncertain macroeconomic outlook.
The Tilney Sustainable MPS team recently added both positions while further reducing the portfolios’ exposure to fixed income and duration in light of the changing interest rate outlook and low yields.
“We had structural overweights to fixed income and duration and we wanted to bring the models down in these areas to reduce volatility and diversify risk given the cloudier macro picture,” says Louie French, Manager of the Tilney Sustainable MPS.
“As a result, we have increased our exposure to alternatives, through two funds – JPM Global Macro Sustainable and The Renewables Infrastructure Group (TRIG) – which give us the risk and revenue diversification we want.”
The JPM Global Macro Sustainable Fund now accounts for around 7% of the portfolios, having first been added in April and topped up in June.
“This fund is one of the few established absolute return vehicles in the global macro space with an ESG overlay applied,” says French. “It’s mid-risk from an absolute return perspective and, while it does not necessarily have the strictest screen applied, it offers us something that is not really available elsewhere in the market.”
TRIG, a London-listed (FTSE 250) investment company which has more than 75 renewable infrastructure projects in the UK, Ireland, France, Sweden and Germany, is another fund recently added to the models to provide greater diversification.
“One of the reasons we like TRIG so much is that it is diversified not only by revenue stream but by geography,” says French. “It has a proven and strong management team, while around 75% of its revenues are fixed over the next 10 years – we think that is attractive given the uncertainty around power prices going forward.”
Elsewhere, the team has slightly reduced its UK equity exposure and added to global funds.
“We have added RobecoSAM Smart Materials to a couple of the portfolios and increased our weighting to it in some others,” says French. “Again, it is part of our move to diversify our revenue exposures and risks, but this fund is also a great way to gain ESG-friendly exposure to a potential commodity supercycle. Ultimately, we are more interested in the picks and shovels used in things like EVs rather than the end product.”