Columbia Threadneedle launches Sustainable Enhanced Income fund

31 August 2023

Columbia Threadneedle Investments, a leading global asset management group, has launched the CT (Lux) Sustainable Global Equity Enhanced Income Fund (The “Fund”).

The Fund, actively managed by global equities portfolio manager Nick Henderson, aims to deliver attractive and resilient levels of income from a ‘core’ portfolio of sustainability income leaders and targets a yield in excess of the MSCI All Country World Index. The portfolio is complemented by an ‘overlay’ strategy to enhance income returns targeting a combined yield of between 4 and 8% per annum. Risk spreading is achieved through the Fund holding a balanced portfolio of equity securities of companies, which may be anywhere in the world. However, the investments of the Fund will be subject to market fluctuations and other risks normally associated with any investment. The Fund may also invest in derivatives. Investors should be aware of the greater volatility of derivative values and the correspondent increased volatility of the Fund’s shares that may arise therefrom.

The Fund, categorised as Article 8 according to the SFDR regulation, is built around sustainability themes to identify 30-50 stocks from companies who stand to benefit from or contribute to trends in sustainable 2 development.1 Nick Henderson and Columbia Threadneedle’s broader global equities team have identified seven persisting ‘megatrends’ including energy transition, health and wellbeing and sustainable cities, which will provide long-term tailwinds to well-placed companies.

Nick Henderson is part of Columbia Threadneedle’s specialist ESG Global Equities team and has a long history of managing global sustainable strategies. This team is part of the broader 24 strong Global Equities team, with c. €20bn under management, and works closely with Columbia Threadneedle’s dedicated responsible investment specialists, which consists of over 40 professionals.

The Fund uses a clear philosophy to meet investors’ sustainable objectives:

• 1. Avoid companies with damaging or unsustainable practices
• 2. Invest in companies that make a positive contribution to society and / or the environment
• 3. Improve companies’ management of Environmental, Social and Governance (ESG) issues through engagement and voting

Focus is on resilient and growing income streams, avoidance of value traps and balanced approach to building the portfolio. Whilst ensuring a clear focus on sustainability solution providers, the resultant portfolio is one of a more core/value style factor tilt relative to many existing sustainable equity portfolios that are typically more growth orientated.

To enhance and diversify the portfolio’s ‘natural’ income, the team employs a risk managed call overlay strategy that aims to boost the fund’s yield by 2-4% per annum. Managed by Columbia Threadneedle’s Systematic Factor Investments team, this dynamic approach combines short positions in call options with a long futures position. The premium received on the call options provides the higher yield, whilst the long futures position maintains market participation in a rising market, participation that would otherwise be limited with selling call options.

Michaela Collet Jackson, Head of Distribution, EMEA, at Columbia Threadneedle Investments, said: “The CT (Lux) Sustainable Global Equity Enhanced Income Fund gives investors the opportunity to combine an enhanced income generating strategy within a framework focused on identifying companies which seek to make a sustainable contribution. We have worked in partnership with our clients to design a strategy which we believe fills a unique gap that harnesses our proven track record of investing in high dividend yield stocks and generating long term returns through a sustainable portfolio. The overlay provides that enhanced income element which investors are so keen to capture in the current persistent inflationary environment. Columbia Threadneedle has a strong heritage in global equities, income portfolios and responsible investment and I am pleased that this strategy brings together these three strengths into one fund for clients.”

Nick Henderson, Portfolio Manager, CT (Lux) Sustainable Global Equity Enhanced Income Fund, added: “The launch of this Fund represents an important milestone. We believe it brings a new dimension to sustainable investing. Sustainable funds tend to be growth orientated while traditional income funds typically find aboveaverage levels of dividend income in what one might consider “sunset” industries such as tobacco or energy. Through its value style factor tilt, we believe our Fund offers a real alternative: a sustainable product that delivers enhanced levels of income which do not come from conventional income sectors.”

Source: Columbia Threadneedle