Asset management firms with high exposure to tobacco are tight lipped on its role in a portfolio following this week’s announcement from Axa that it was divesting from the industry.
Henderson’s Global Equity Income fund has the joint highest exposure out of fund managers that disclose holdings, accounting for 8.1 per cent of its portfolio, according to FE data.
The asset manager would not respond to questions about whether tobacco remained a good investment or whether it had considered divestment from the asset class.
A spokesperson from Schroders, whose Prime UK Equity fund was tied with Henderson on the highest exposure, also at 8.1 per cent, did not address why the firm considered tobacco a good investment, but says it does work with clients who would like to divest from tobacco.
“We’re happy to manage these mandates for those clients who are prepared to take a long-term view on the sustainability of tobacco companies or have an ethical stance that they want to reflect in their investment policy,” a spokesperson said in a statement.
“We work with them to identify and quantify the shorter term risks and performance implications that they need to take into account.”
Rounding out the top three heaviest exposures was the Artemis UK Select fund, with 7.2 per cent in tobacco. The asset manager did not respond to requests for comment.
While Axa Investment Managers will be subject to the divestment via the mandates it runs for its parent company, it will continue to allocate to tobacco for other clients.
“We take an active approach to monitoring companies and act as stewards of investments made on behalf of our clients,” a spokesperson for Axa Investment Managers said in a statement.
“In particular, our engagement focuses on situations where a company’s strategy or performance on environmental, social and governance issues leads us to believe that there may be a material impact on the company’s performance.”
The asset manager said it was not able to comment on the value of Axa divestments from its portfolio as it does not disclose details about segregated mandates.
Axa Group will immediately divest its €200,000 in tobacco stocks, and over a longer period will sell out of its €1.6bn in tobacco industry bond holdings. It will also not initiate any new positions in tobacco industry bonds, effective immediately.
Passive investment manager for Hargreaves Lansdown Adam Laird says ethics are a “personal subject” and describes tobacco as a high returns, low volatility sector.
“There are always good and bad investments, socially responsible investing is no different. Investors shouldn’t put the ethical cart in front of the investment horse – review every aspect of a fund before making decisions,” Laird warns.
But Thomas Buberl, deputy chief executive and incoming chief executive of Axa Group, said in a statement that the human and economic cost of tobacco made the case for divestment clear.
He also urged other firms to follow the move, saying “our hope is that others in our industry will do the same”.
For those wanting to eliminate tobacco from their portfolios, Laird suggests the Kames Ethical Equity portfolio, for UK small and mid-cap exposure, which screens out tobacco, alcohol, weapons and gambling companies.
For bond investors he recommends the Royal London Ethical Bond fund, which screens out companies generating more than 10% per cent of revenues from certain industries.