Magellan chair Hamish Douglass has hit out at “arrogant” asset managers who are seeking to control net zero emissions in their portfolios.
Earlier this month, several asset managers including Franklin Templeton and Ninety One announced they had signed up to the Net Zero Asset Managers Initiative which aimed to support the goal of net zero greenhouse gas emissions by 2050.
However, Douglass said, while the direction of the Magellan portfolios was towards net zero, he would not actively be controlling it with a target in mind.
“There are some asset managers who are hooking up to these net zero agreements and forcing investors into that, we are not as arrogant as that,” Douglass said.
“It is not our money, we don’t dictate where our clients’ climate goals should be.”
Rather than exiting all exposure, Douglass said he preferred to use capital to invest in companies which were trying to decarbonise and that companies that chose to divest were “passing the buck” to someone else.
He said the only carbon risk in the funds came from three US utilities but that Magellan had been approached by some investors to create a bespoke portfolio which removed the utilities and reduced the carbon risk.
With this in mind, Douglass said, it was not “inconceivable” for the firm to offer a separate portfolio which had a lower carbon risk in the future.
Meanwhile, he said he was still confident about the positioning of the Magellan Global fund and its defensiveness. The fund had underperformed due to his large weighting to defensive companies rather than cyclical ones and had a 5% weighting to cash, which was lower than usual, but the manager believed it would be costly to hold more than this given inflation was only expected to be transitory.
“We are fully invested, the most in some time, and should be OK. Over the next three to five years, the portfolio is invested in some outstanding businesses which have attractive growth,” Douglass said.
“The hardest part is inflation rearing its head but I think the portfolio will do just fine relative to the market.”
The Magellan Global fund had returned 10.3% over one year to 30 June, 2021, according to FE Analytics, versus returns of 28.3% by the global equity sector within the Australian Core Strategies universe.
Performance of Magellan Global fund versus sector over one year to 30 June 2021