Andy Clark joined ESG-focused EdenTree Asset Management as chief executive in September 2020, after eight years overseeing HSBC Asset Management’s UK arm.
Financial News sat down with Clark to find out what attracted him to the £3.7bn asset manager, how it plans to make it better known, and what he thinks of the regulatory crackdown on sustainable finance.
HSBC Asset Management was a large player. What prompted your move to EdenTree?
The unique structure; we are part of the Benefact Group, which is owned by a charitable trust.
When I started I was asked to produce a three, five and 10-year plan. I’ve never been asked to produce a 10-year plan before, but the philosophy of the business is long-term. Wherever I worked before, I found the industry had become more short-term. That’s odd, because we preach long-term investing, but in some cases are lurching from quarter to quarter.
There is also a different culture here, which feeds into a wider ESG story. It is not just about a label. When I first started in the industry everything was about performance. Then it was about the star fund manager. But investors are now looking at the company level, rather than the fund. They want to know about the culture and ownership structure, and how staff are incentivised. That’s a real change.
ESG is a complicated market, but it is about long-term investing with an ethos you believe in. Whether or not you think defence is ESG following what’s going on in Ukraine, you can’t suddenly flip; you have to stay true to your beliefs and remain consistent. We are not trying to play games.
ESG has come under intense scrutiny. How concerned are you about regulators stepping in?
I’m a little sad. Because when you get to the point of quite heavy regulation, you’ve stepped back from the trust and value of law. It is almost as though the industry has got itself into a pickle and is being told what to do.
I’m not a fan of heavy regulation in this area. Labels worry me a bit. Once you start putting labels on things, they don’t equal a successful financial investment for everybody. If it allows people to make an informed financial decision then that’s a great thing, but it’s tough to make that clear to everyone.
We are under pressure to make sure the label fits and then show the data. We will weed out the charlatans, but we are also in danger of making everyone else a bit samey. Can they still be innovative and push the boundaries a bit?
Greenwashing is a thing, and at some point examples need to be made to show what ‘good’ looks like. There are some bad examples out there, the FCA will find, but I know when I speak to clients large and small their biggest concern is what it means for them. They don’t want to be caught up in all of that.
The fear of regulation is creating some positivity, but I hope it doesn’t become too heavy-handed.
EdenTree is an active house. What are your thoughts on ESG passives?
I’ve always been supportive of active and passive. But you can’t do ESG passively. If you are going to talk about meeting companies and talking culture, despite all the deep dives on financials, remuneration and governance, a lot of it is common sense. You just don’t get that from passive.
When people say your fees are more than passive, you pay for a bit more expertise, especially with ESG.
How do you plan to make EdenTree better known among investors?
Widening the product range is really important. Having a good UK equity fund is fine, but innovation starts conversations with clients. Our infrastructure fund is a good example.
We were very good at what we did, but it wasn’t as commercial as it could have been. The assumption was they just know. We’ve taken on eight additional distribution heads to spread the word. You’ve got to get out there and be talking about it.
There is no conflict here and we’re not arguing with the marketing department. Everyone is aligned and clients are starting to tune in that an asset manager might be buying fracking on one side and promoting green funds on another. That doesn’t pass the sniff test for a lot of people.
Are we going to spend millions on big marketing budgets? No. There is no secret sauce but it is about getting the message out there.
Would you consider being bought or acquiring a rival?
The phone rings and the answer is always the same — we’re not for sale. We’re small, but because of the group we are stronger. Where we definitely look outside is for opportunities or teams. Culture here is important and diluting it is not on the table. It would be unacceptable for us to buy stuff and try to smash it together.
Any other concerns about the funds sector?
Asset management has grown exponentially as an industry over the past 20 years. The focus on the industry will get tighter and tighter as the numbers get bigger and bigger, and the growth of defined contribution pension schemes means everyone is investing at some level.
You have to manage the big beasts, but the smaller players will feel a lot of the squeeze to meet the same standards. There is a danger that you squeeze out innovation at boutiques. While we see mergers and acquisitions at the top end, we’ll also see it at the smaller end.
Risk is inherent in the financial system, but it moves around depending on what’s happening. A few weeks ago it was liability driven investing and gilts.
We offer open-ended funds for daily liquidity, but most investors don’t require daily liquidity — they would be happy with weekly liquidity. But to launch a fund with weekly liquidity you won’t get onto most platforms. I don’t think we can roll back from offering daily liquidity, but I question how many need it.
To contact the author of this story with feedback or news, email David Ricketts