European exposure overall has been harder hit by greater impact on energy prices and proximity to Putin’s invasion of Ukraine. Quality and growth stocks, two biases we have in our portfolios, have underperformed the broader market in this period as well. Economic uncertainty has led to volatile markets, and we expect this volatility could continue until we have a higher level of visibility around the persistency of inflation, monetary policy, and the resulting impact on global economies.
Portfolio positions may be initiated or increased for attractive company opportunities that promote sustainability – including electric vehicles and autonomous driving – provided valuations and qualitative factors like culture and management strength remain attractive. Other possible investments may include financial sector companies positively exposed to the demographic transition through aging populations’ needs for savings via insurance and asset management products.
Firms that actively promote sustainability issues also include those expanding consumer financial access by fully digitizing their product lines. We would also look for qualities like strong customer relations and a defensible franchise.
- A multi-thematic focus allows our team to identify companies positively exposed to long-term environmental, demographic, technological, and governance trends; and in doing so, select themes that we believe will drive economic growth going forward, and diversify our portfolios around these economic drivers accordingly.
- Our high quality bias results in portfolios that hold companies with strong, visionary management teams that reinvest in their business, and create high quality revenues. Management of sustainability risks and opportunities is a key consideration in our assessment of quality.
- Our long-term ownership perspective, with an average 8-year holding period, allows for exploiting market inefficiencies that arise from the stock market’s bias toward periods of less than a year.
- Finally, Mirova’s high conviction approach allows the team to consistently adhere to our investment process.
Overall, we believe a long-term approach that focuses on building a diversified portfolio of high quality companies and fully integrates sustainability considerations can allow portfolio managers to smooth out quarter-to-quarter volatility that is tied to economic cyclicality. To address unexpected volatility, when assessing valuation, the team models a range of potential outcomes to allow for a comprehensive understanding of risk exposure.
During periods of underperformance, a manager may be more likely to challenge assumptions and stress-test valuation models. At Mirova, we have done this work and we feel our portfolios are well positioned today to outperform for the long term, with high quality companies with strong fundamentals trading at very attractive valuations.
Our Global Sustainable Equity strategy enjoys an 8-year track record, while the International Sustainable Equity strategy has just hit the critical 3-year mark at the close of 2021. Both funds have delivered strong performance vs. both peers and benchmark.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.
All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.
Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.