Mapfre AM – the asset management arm of Spain’s and Latin America’s largest general insurer – is expanding its funds business with the launch of the Good Governance fund in its Luxembourg Sicav offering.
In a strategy focused on extending the range of risk products to consumers and institutional businesses to enable them to generate long term real returns at times of falling savings rates, the company is adopting a Responsible Investment (RI) approach to expanding its fund range.
The new fund has been developed following extensive academic research into the impact of ESG factors on investment returns.
Mapfre AM recognised that in terms of pure performance the most notable contributor is governance. Equally, the company is aware that embedding environmental and social factors into its company research through its RI policy ensures, for investors, a degree of hedging against moral and ethical concerns.
The academic research commissioned by Mapfre from Cranfield business school in the UK and Siena University in Italy led the company to decide that good governance alone is not enough to ensure MAPFRE AM can fully deliver its fiduciary duties to clients.
For while the academic research showed that good governance was important in delivering good performance it was equally important to ensure the firm chose quality companies, by which the academics meant “the ability to generate sustained earnings over the long term.” This is perfectly aligned with Mapfre AM’s “value investment” approach.
By combining the two elements of ‘governance’ and ‘quality’ Mapfre AM found, in back testing, significant outperformance of the good governance fund strategy against the MSCI world index.
In a twist to the usual approach to identifying good governance, the two fund managers behind the new fund José Antonio Méndez and Manuel Rodríguez focus particularly on the ownership of businesses and their accounting practices rather than overemphasising compositions of board and remuneration strategies.
Such an approach demands that they seek deep qualitative information through fieldwork when researching potential companies for investment.
Mapfre’s CIO José Luis Jiménez said: “Mapfre Group is committed to the sustainable development goals approved by UN member states in 2015. It is therefore a natural development that its asset management functions pursue a policy of Responsible Investment.
“The Good Governance Fund is one of the first tangible steps that we as asset managers have taken to support our wider business in its aims and objectives to make a significant contribution to the well-being of society. We will be taking further initiatives over the coming months and look forward to introducing our fund to our markets in Europe and Latin America,” said Jiménez.