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MAPFRE AM Good Governance: an ESG success story

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This fiscal year is proving particularly complicated. High volatility resulting from the coronavirus crisis is complicating matters for asset managers. However, one portfolio within MAPFRE AM’s ESG range is performing very well in comparison to competing funds and particularly well compared to its benchmark..
This is the MAPFRE AM Good Governance fund, which, according to the latest data as on August 31, is posting a return of more than 15 percent so far this year, whereas the Stoxx Global TMI has declined by 3.47 percent. This is because its balance has grown by 8.57 percent since the State of Emergency was declared in March, compared to the 7.73-percent fall seen in the benchmark. “The key to the Fund’s good performance this year is the rigorous and consistent application of investment principles, avoiding any influence from market noise. In practice, the global reach of the fund has allowed us to include technology companies in the portfolio, whose performances this year are exceptional,” say Manuel Rodríguez López de Coca and Thomas Nugent, who manage the fund.

MAPFRE Asset Management launched this product in late 2017. It is a global equity fund within the MAPFRE ESG range and focuses on the application of good governance criteria. This governance is measured according to different variables, including the composition of the governing body, the independence and separation of the CEO’s functions from those of the President, and diversity. “We use the same investment strategy as other MAPFRE AM funds but also study corporate governance. This means we look for quality companies whose business we understand. We identify companies with favorable trends in the long-term and with honest and competent management teams. Then, of course, we buy their shares at prices that we consider attractive,” they add.

In addition to this fund, MAPFRE AM has two more funds within the ESG range: the MAPFRE AM Inclusión Responsable fund, which was launched at the end of last year in partnership with French company La Financière Responsable (LFR) and invests in companies that promote the inclusion of people with disabilities; and MAPFRE AM Capital Responsable, which invests in companies that meet ESG criteria. The latter is also complemented by a pension fund.

Although these funds’ balances have declined over the year, by 6.94 percent and 1.24 percent respectively, their benchmarks also fell—both EuroStoxx 50 (-11.04 percent) and EAA Fund Moderate Allocation (-4.44 percent)—according to data as on August 31. “As MAPFRE AM has long insisted, ESG criteria, and in this case good corporate governance criteria, help us identify the leading companies of the future. It is impossible to grow a sustainable business without concern for the company’s social and environmental footprint,” say the managers. “After significant study, we concluded that ESG metrics greatly influence business culture, profitability and a company’s ability to attract talent, which ultimately leads to a better, stronger company,” they add.

Their commitment to long-term investment has led to little movement in the portfolio during the worst of the pandemic. “We must bear in mind that we are investors, not speculators. This means that we seek to generate alpha for the fund through long-term investment where we clearly see significant correlation between the results of an in-depth quantitative and qualitative analysis and the behavior of the stock on the market,” the MAPFRE AM experts explain. “As a result, the fund’s positions are purchased with the aim of holding them in the portfolio for a significant period of time,” they conclude.