4 Year Anniversary: Resource Efficient Core Equity Fund

Since its inception four years ago the Fund has met both its financial and environmental goals.

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]

Since its inception four years ago the Fund* has met both its financial and environmental goals

Investment literature is awash with studies asking whether ‘environmentally friendly’ (or ‘green’) portfolios can be operated without incurring a financial penalty. The Osmosis Resource Efficient Core Equity Fund has demonstrated positive returns relative to the MSCI World benchmark since its launch in June 2017 (see full performance) while significantly reducing the environmental footprint of the investments held.

Over the period the Fund has delivered annualised outperformance of 0.90% (net of all fees) with a tight tracking error to the MSCI World, while simultaneously reducing ownership of carbon, water and waste by an average of 65%.**

Annual Returns since Inception (31 May 2017)

 May 17 – May 18May 18 – May 19May 19 – May 20May 20 – May 21
Osmosis Core Equity Fund12.52%-0.12%7.69%42.67%
MSCI World Index11.57%-0.29%6.80%40.80%
Excess Return0.95%0.17%0.90%1.88%
Source: Osmosis IM, Bloomberg, Barra, LLC’s analytics and data were used in the preparation of this report. Copyright 2015 BARRA, LLC. All Rights Reserved Osmosis Resource Efficient Core Equity strategy is a systematic investment strategy. Returns represent the actual returns for the Core equity Fund, Class A. Such returns are net of fees, costs and dividend withholding tax. Different fees apply to each share class and a client’s returns will be reduced by the advisory fee and other expenses incurred in the management of its account. Please see the attached performance calculation disclosure language. Past performance is not an indication of future performance.

A unique sustainable factor based on Resource Efficiency

Identification of a sustainable alpha signal is a challenge solved by only a few in the ESG space.

The Resource Efficient Core Equity Fund launched following extensive research, correlation and attribution analysis on our proprietary Resource Efficiency Factor. Developed over 12 years, our proprietary and objective environmental research process enables the identification of those companies that are better placed to deal with the increasing number of environmental challenges that lie ahead. At the same time, those companies that refuse to change or are too slow to adapt will continue to destroy shareholder value.

Managing active & environmental risk

All portfolios seeking a sustainable outcome will naturally bring in active risk relative to a market-cap-weighted benchmark. The Osmosis program is unique in that the active risk is controlled and targeted towards a sustainable alpha signal.

Our goal was to ensure that when investors seek to reduce their portfolio’s environmental footprints, the risk that they assume is not left unrewarded. Our core strategies aim to deliver better risk-adjusted returns than the respective benchmarks by tilting the portfolio towards stocks we have identified as more resource-efficient and thus more likely to outperform their sector peers.  All the strategies deliver the main benefits of index investing by offering a highly diversified and cost-efficient portfolio.

Research has evidenced that Resource Efficiency is a return signal independent from traditional country, sector, size and style factors. The allocated risk budget is targeted towards resource efficiency through the idiosyncratic part of the risk models, risk that is usually diversified away. Through this smarter management of the active risk,  the core strategy can replace the MSCI World without impacting existing exposures and enhancing the risk-adjusted return.

A broad economy approach

When we launched in 2009, we were the first sustainable asset manager to focus on a broad economy solution.  We recognised that addressing supply was only meaningful in the context of addressing demand. This Fund was developed to appeal to investors from institutions to individuals who shared our conviction that a well-diversified global portfolio, targeting overweight and underweight positions to environmentally efficient and inefficient companies across the broader economy, would result in improved portfolio returns.

A significant environmental impact

The outcome of this sophisticated core replacement strategy is a significant reduction in the portfolio’s environmental footprint. The strategy delivers significant reductions in ownership of Carbon (60%), Water (66%) and Waste (69%) (as of 31 May) relative to the benchmark while remaining invested across the broader economy.


4 Year Anniversary: Resource Efficient Core Equity Fund

Osmosis believes that the planet’s long-term sustainability demands a re-evaluation of overall resource consumption. Carbon, Water and Waste, are each subject to increasing regulation, cost pressure and social scrutiny.  Companies focused on environmental impact need to address those aspects of consumption and pollution that are most relevant to their business model, which will often include the mitigation of resources other than Carbon. Osmosis’ research demonstrates that this three-factor approach also delivers a more reliable investment signal.

A growing client list

Osmosis’s core range has grown to ~ $1.7 billion since launch and attracted various sophisticated institutional investors. Recent mandate wins have included an Australian Government Pension Scheme, a European and Canadian foundation, and Brazil’s largest financial platforms.

Fund AUM is currently at ~$580m, and the Fund is daily traded in a UCITS vehicle with multiple share classes and a low total expense ratio (TER). We hope that investors who are currently reviewing portfolios and evaluating their approach to sustainability will join Osmosis on the next part of our journey. We welcome these conversations.


Important Information

* This Fund is not available to US investors. Separate accounts are available for US investors using the same model and investment objective of the Fund.

** The foot printing metrics above have been calculated using a Total Metrics approach, apportioning carbon emissions, water consumption and waste generation to the investor based on an equity ownership perspective. Calculating the “owned” emissions, water and waste from each position in the portfolio and benchmark, and adding those metrics yields the total impacts for the portfolio. The calculations have been based on metrics recorded in the MoRE DataBase where available, and industry averages have been used to estimate any gaps in the data coverage.


An investor’s actual account is managed by Osmosis based on the strategy, but the actual composition and performance of the account may differ from those of the strategy due to differences in the timing and prices of trades, and the identity and weightings of securities holdings.

Past performance may not be indicative of future results. Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy will be profitable. No current or prospective client should assume that future performance will be profitable, equal the performance results reflected, or equal any corresponding historical benchmark index. For reasons including variances in fees, differing client investment objectives and/or risk tolerance, market fluctuation, the date on which a client engaged Osmosis’s services, and any account contributions or withdrawals, the performance of a specific client’s account may have varied substantially from the referenced performance results. In the event that there has been a change in a client’s investment objectives or financial situation, the client is encouraged to advise us immediately. It is important to remember that the value of investments, and the income from them, can go down as well as up and is not guaranteed and that you, the investor, may not get back the amount originally invested. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Osmosis accepts no liability for any failure to meet such forecast, projection or target. Past performance is not an indication of future performance.

Net Performance. Net returns are net of fees and in USD unless indicated otherwise. Net returns are net of fees, costs and dividend withholding tax. Different fees may apply to a client’s account and a client’s returns may be further reduced by the advisory fee and other expenses incurred in the management of its account. Please see the specific performance disclosure under each slide for additional details. Our fees are fully disclosed in Part 2A of Form ADV and may be updated from time to time.

The historical index performance results for all benchmark indexes do not reflect the deduction of transaction, custodial, or management fees, the incurrence of which would have the effect of decreasing indicated historical performance results. Indexes are unmanaged and are not available for direct investment. The historical performance results for all indices are provided exclusively for comparison purposes only, and may or may not be an appropriate measure to provide general comparative information to assist an individual client or prospective client in determining whether Osmosis performance meets, or continues to meet, his/her investment objective(s). The referenced benchmarks may or may not be appropriate benchmarks against which an observer should compare our returns.

The MSCI World Index captures large and midcap representation across 23 Developed Markets.

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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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