Osmosis launch Total Return Swaps program on its Resource Efficient Core Equity Index

J.P. Morgan acted as a counterparty to the first trade which saw Danish Pension Fund PKA invest ~$1 billion into the swaps program earlier this year.

This post is issued by Osmosis (Holdings) Limited, a London based investment management group. For more information, please contact Lisa Harrison on 07716 912832 or [email protected]

Following consultation with its growing international client base, sustainable investment manager Osmosis has added Total Return Swaps (TRS) to its product offering. Osmosis believes the ability to gain access to its Resource Efficient Core Equity Index via Swaps fills an important gap in the market and is a logical next step for large pension funds seeking to manage their cash exposure while benefitting from a sustainable source of return.

Total return swaps are a highly flexible risk management and return-shaping instrument, frequently used by large institutions to manage cash and synthetic exposures. While their use has greatly increased in recent years, larger customised portfolios have historically allocated their TRS exposure across vanilla (non-sustainable) indices. By utilising Osmosis’s proprietary indices its TRS clients can focus on delivering alpha in their cash holdings by maximising exposure to our factor of resource efficiency, a proven source of sustainable and uncorrelated return.

J.P. Morgan acted as a counterparty to the first trade which saw Danish Pension Fund PKA invest ~$1 billion into the swaps program earlier this year. PKA invested $700 million into the Osmosis Resource Efficient Core Equity Fund in July 2022. Total AUM managed against the award-winning Core Strategy has climbed exponentially in recent months and now sits above $12 billion.

Ben Dear CEO of Osmosis said:

“Our swaps solution provides our investors the opportunity to broaden their exposure to our sustainable investment programs. Our clients have worked tirelessly in recent years to integrate sustainability into their investment portfolios through their physical allocations, so it makes sense to facilitate viable derivatives products, enabling investors to capture this sustainable return across their equity exposure. We are grateful to PKA for this latest forward-thinking investment, a move that not only shows their commitment to ensuring the best possible returns for their members across all their assets but also their continued trust in Osmosis’s investment thesis.”

Michael Nellemann Pedersen CIO, PKA:

“We are delighted to extend the environmental aspect that is characteristic of PKA’s equity strategy to our swaps exposure. In this way, we can continue to take advantage of the Osmosis Resource Efficiency investment thesis which combines significant environmental savings with targeting better returns through an objective data-driven approach that will help support the pensions of our members.”

Ludovic Peiron, Global Co-Head of Equity Derivatives Sales and Marketing, for J.P. Morgan said:

“We are observing a growing trend among investors who are actively seeking to align their sustainability objectives with their overall portfolio management requirements, and increasingly using equity derivatives for efficient strategy implementation and cash management. The collaboration with Osmosis and PKA on this first trade reaffirms J.P. Morgan’s commitment to providing investors with customised solutions that seamlessly integrate sustainability preferences with their trading activities.”

About the Core Equity Strategy

The Osmosis Resource Efficient Core Equity Strategy targets maximum exposure to the Osmosis proprietary Resource Efficiency Factor within a tight tracking error while seeking to replicate the style, industry, currency, and risk exposures of the benchmark. The Osmosis Resource Efficiency factor is derived from an objectively driven research program and is the only approach that focuses on reducing portfolio ownership of three key environmental metrics, Carbon, Water, and Waste while targeting better risk-adjusted returns than the parent index.

Developed for clients as a core equity replacement, the strategy allows investors to target an uncorrelated source of sustainable alpha while greatly reducing their environmental footprint.

About Osmosis

Osmosis launched in 2009 and is majority-owned by management and employees. The company currently manages over $13.5bn in sustainable assets and is headquartered in London, with a growing global presence. Osmosis believes that targeting better risk-adjusted returns and delivering significant environmental impact do not need to be mutually exclusive endeavours. Through its unique Model of Resource Efficiency, the company has demonstrated that sustainability metrics, if quantifiable and objective in nature, can be applied to mainstream equity portfolios to generate alpha.

The Osmosis team of quantitative environmental analysts and portfolio managers is singularly focused on delivering three levels of impact. Better risk-adjusted returns, measurable environmental reductions, and an active engagement programme to promote better corporate environmental disclosure.

Osmosis counts Government Pension Funds, State Pension Funds, Insurance Companies, Foundations, Endowments, Family Offices, and Banks amongst their client roster spanning the UK, Europe, the Nordics, North and South America, Asia, and Australia.

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Important Information

Global Investors (ex US). This report is issued in the UK by Osmosis Investment Management UK Limited (“Osmosis”). Osmosis is authorised and regulated by the Financial Conduct Authority “FCA” with FRN 765056. This document is a “financial promotion” within the scope of the rules of the FCA. In the United Kingdom, the issue or distribution of this document is being made only to and directed only at professional clients (as defined in the rules of the FCA) (“Professional Clients”). This document must not be acted or relied upon by persons who are not Professional Clients. Any investment or investment activity to which this document relates is available only to Professional Clients and will be engaged in only with Professional Clients.

This document is issued by Osmosis Investment Management US LLC (“Osmosis”). Osmosis Investment Management UK Limited (“Osmosis UK”) is an affiliate of Osmosis and has been operating the Osmosis Model of Resource Efficiency. Osmosis UK is regulated by the FCA. Osmosis and Osmosis UK are both wholly owned by Osmosis (Holdings) Limited (“OHL”).

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