“We’re not changing our stripes, that’s the nature of the beast. We’re not changing overnight, that’s the way we’ve articulated. Our clients have come on board on the basis of that belief and we’re sticking to it,” Mr Gonzalez told The Age and Sydney Morning Herald.
Mr Gonzalez said active fund managers were better placed to ride out the crisis than index providers as it was easy to pick sectors that were under pressure – such as hospitality and aviation – but harder to pick companies within those sectors that would thrive.
“Active management thrives on market volatility that opens up opportunities because you can move around, do the work, make a call, and position the portfolio accordingly. Everyone is in the eye of the storm but you have the ability to manage through that as opposed to being a cork on the ocean just floating wherever the wind takes you,” Mr Gonzalez said.
Pendal’s revenue from performance fees dropped by $3.8 million to $600,000 when compared to the same quarter last year. Market uncertainty also forced Pendal to slash its interim dividend by one quarter, with shareholders to be paid 15¢ per share down from 20¢ in the first half of 2018-19. The company reported a 2 per cent increase in average funds under management to $98.6 billion and a 21 per cent decrease in statutory net profit after tax to $54.8 million when compared to the first half of last financial year. Investors responded positively to the results, with the share price climbing by as much as 9 per cent on Monday.
Pendal also announced the expansion of its impact investment arm, Regnan, and the launch of the first financial product from that business: a sustainable bonds and debt portfolio. Mr Gonzalez said the environment, social and governance finance industry was fast-growing and he predicted sustainable investment principles would soon become mainstream.
“It very much reminds me of the 1980s and early ’90s around governance and voting. Perhaps not everyone used to vote on everything. It became an issue and everyone picked up on it. Now it’s expected, it’s what you do. It’s become mainstream. Incorporating ESG factors into your investment decisions, I think will become mainstream.”
Research by Morgan Stanley found ESG funds account for $1 trillion globally and inflows grew by 13 per cent in the first quarter of this year, making the investment approach a “critical growth avenue for fund managers”.
Pendal hired a four-person team to expand its ESG research arm into investment management and said an international equities portfolio focusing on low-emitting companies would be available by the end of the year.