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Blog Posts — November 21, 2019

Q&A: Kairos on Long-Short ESG

The STOXX® Europe 600 ESG-X Index has been licensed to Kairos Partners SGR to delimit the investment universe of the model portfolio of Kairos International Sicav – ActivESG P (KIS ActivESG), one of Europe’s first available long-short funds following environmental, social and governance (ESG) principles. 

The uniqueness of this fund also keeps a particular role for the index, which doesn’t constrain the active stock-picking of the manager.

The STOXX Europe 600 ESG-X Index is a version of the flagship European benchmark that excludes companies according to standard responsible policies followed by large asset owners. It is part of a broad family of ESG-X versions of global, regional and country benchmarks.

To find out more about KIS ActivESG, Pulse Online caught up with Riccardo Valeri, Senior Portfolio Manager at Milan-based Kairos.

Riccardo, what drove Kairos to come up with such an innovative product?

Alternative products are Kairos’ DNA, and we are proud of our long experience in alternative strategies. Our expertise allowed us to launch a different product in the ESG funds market.

Our investment process is focused on transparency: every company in the investible universe is firstly carefully analyzed according to ESG criteria. We are be able to distinguish between long and short ideas, which, after a thorough fundamental analysis process, can join the KIS ActivESG portfolio. The use of derivatives products allows for a better management of the fund’s net exposure and limit its volatility.

The fund is actively managed but uses the STOXX Europe 600 ESG-X index as a reference for sustainability criteria. Can you explain how that works? 

The STOXX Europe 600 ESG-X index is the investment universe of our model portfolio. However, because of the active nature of the product, the management team will have full discretion over the composition of the portfolio, integrating traditional financial valuation with ESG criteria. 

This new ESG solution is yet more proof that sustainable norms are becoming a common requirement by many investors. How do you see the investment landscape in Europe changing with regards to products that meet responsible principles? 

Funds with a focus on socially responsible investing are enjoying a record year of inflows. Institutional investors moved first, but now even retail investors are allocating capital at a very fast pace. We expect that sustainable investments will become mainstream in a decade or less.

Lastly, why did you choose the STOXX Europe 600 ESG-X index as the index of reference? 

STOXX is a major index provider in Europe. We’re already using their indices for our standard products, so it was easy for us to choose its ESG integration as the reference market for our ESG solutions.

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STOXX® Europe 600 ESG-X Index