Impact investment specialist CIRCA5000 recently announced that it was launching its own ETFs to support its aim of channelling investment to companies solving the most pressing environmental and social challenges.
Tom McGillycuddy, co-founder of the firm, was in the past, part of the founding team of Wellington Management’s USD1 billion Global Impact Fund and explains that CIRCA5000 has largely been a UK retail platform to date, whose investors represent 10s of thousands of customers largely aged between 30-40 and based in the UK’s major cities.
“We are now creating and launching ETFs which will be used by our retail audience but a broader audience as well,” McGillycuddy says.
“I come from an actively managed institutional management background and my old clients were pension funds or sovereign wealth funds who want structure and depth of research and these ETFs are designed to be used by institutional funds down the line.”
The firm has been using a range of ETFs produced by third party managers. “Our assessment of the ETF landscape in the UK and Europe was that there were limited good quality genuine impact ETFs available. Funds that were built from scratch using high quality impact research that was transparent to the investor. There were very few that were built from a pure impact perspective so we felt that there was a gap in the offering for the broader institutional investment management space and for us as well.”
McGillycuddy notes that there were lots of funds that were being re-badged as ‘impact’: “but when you looked under the hood, the existing universe wasn’t as strong as it could be. We felt that we were in a good place to solve those problems ourselves.”
Whether an ETF or whether passive or active, there were probably four or five maybe even just six funds available globally that were good from an impact perspective, he says.
CIRCA5000 has applied what it deems to be the best-in-class active research and put it into a passive structure for its new funds. “This is the engagement that you would get in an active impact fund but at half the price and available to a wider audience,” he says.
He believes that ESG has been over-marketed and used as something it is not, with lots of problems stemming from misusing the ESG label.
“What people want is impact investing,” McGillycuddy says. “Companies that directly address problems, and hopefully the regulatory environment and consumer awareness will force a change.”
The process of launching their own ETFs was driven by a desire to launch their own products, not use a white label platform. “That wasn’t right for us as we want to build more in the future,” he says. “We needed our own platform which is not easy and take a while but is worthwhile for the business. There was nothing on the investment side that surprised me as that’s our bread and butter but the infrastructure of launching an ETF was new to us and presented a learning curve, but we got to a good place and everyone has been friendly and welcoming to us.”
The CIRCA5000 funds should go live in early June.
