New Capital, an EFG Company, has launched the New Capital Sustainable World High-Yield Bond Fund (Fund) to complement its established, high-conviction global credit product range.
The Fund is an Article 8 fund which aims to maximise returns within the high yield universe by conviction-based investing in sustainable companies from around the world.
The Fund is co-managed by Lila Fekih and Mark Remington, part of New Capital’s 10-person strong fixed income team. The team’s underlying investment philosophy is based on the belief that companies exhibiting good performance on material ESG issues are more likely, in their opinion, to be more resilient during challenging economic conditions.
The team defines a sustainable company as one which manages its ESG (environmental, social and governance) risks effectively to protect or enhance its financial profile. It may not have addressed all challenges, but the trajectory should be a positive one.
The team utilise two proprietary valuation models, which assess the price of a bond and probability of default. Hard screens are applied followed by in-depth analysis assessing a company’s vulnerability to ESG risks, financial implications of such risk, and crucially, a company’s strategy to address such risks and capitalise on opportunities generated. This analysis, which includes assessing the effectiveness of the management’s (or management team’s) sustainability strategy and the execution risks involved, is aimed at understanding the current risks but also how the future ESG trajectory impacts credit worthiness.
In addition to the wider fixed income team, Lila and Mark are further supported by the in- house specialist ESG team that provides key systematic and qualitative inputs to the investment process. The co-managers also work closely with dedicated macroeconomic research colleagues to ensure the portfolio is positioned accordingly for the prevailing economic environment.
Lila Fekih, Co-Portfolio Manager of the New Capital Sustainable World High Yield Bond Fund, says: “By investing in a portfolio of sustainable companies, we aim to reduce the number of potential defaults and maximize total return. We believe that companies that manage their ESG risks effectively will be able to reduce their financial risks.”
Moz Afzal, Global Chief Investment Officer, EFGAM, says: “Increasing regulation and policies aimed at tackling climate change, decarbonisation and energy transition, coupled with technological innovation enabling companies to be more sustainable, is driving the flow of capital. Heightened social awareness and demand for responsible and sustainable business practices are further fuelling client demand. Ultimately this weight of capital means that sustainable investments will enjoy better access to funding and a lower cost of capital, impacting the financial health of a company.”
