Ethical Performance
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Many happy returns

August 2015

Alquity was founded in 2010 by Paul Robinson, to offer investors a more responsible way to invest by achieving strong returns whilst putting something back and creating a Virtuous Circle of investment. On its fifth birthday, he talks to Liz Jones
 

Growing up with an independent financial advisor as a father, going into the City as a young man was an obvious move for Paul Robinson, founder and ceo of Alquity Investment Management.

It’s not an industry he particularly likes, however describing it as ‘psychopathic’. “It’s an industry where the concept of trust is absent and that’s not an unwarranted reputation,” he says. But Robinson and his business, now celebrating its fifth birthday, looks to do things differently.

Alquity – the word is a fusion of ‘Altruism’ and ‘Equity’ – is a shared values investment business. “Through our funds, such as the Africa fund and the Future World fund, we invest in fast growth emerging markets where we think we can get clients good returns,” Robinson explains.

“We look at all the businesses we invest in on an environmental, social and governance basis (ESG). As well as looking at all the numbers, we look at how they behave. Do they treat their workers correctly? Do they respect the environment? Not from an ethical standpoint but because if you do those things properly you get better returns in the long run.”

On top of that, the business then donates up to 25% of its revenue to fund things like microfinance to help the poorest in the communities where it invests. He believes that while helping people who are poor just because of where they were born is a good end it itself, actually helping these people get their first foot on the economic ladder has a far wider impact. Indeed, he feels that Alquity is helping to build the economy that it is investing in. “It makes no sense to invest in these emerging economies and then leave half the population economically inactive on the side,” he says.

Robinson has always been an entrepreneurial spirit. He ran a software company at the tender age of 14 and built up his own multi-million fund management business in Hong Kong, after several years working for Standard Life and Scania Group. He also worked with several African charities (between breaks in his financial career), where he developed a deep love for the continent. “So one day when I was out with friends and saw a photograph of a young girl sitting at a locked water tap, we started to talk about what we could do about it.” Robinson’s entrepreneurial spirit kicked in once more and he and his friends went on to set up One Water – the bottled water company where 100% of the profits are donated to fund water projects in Africa. Today it is sold in Starbucks and is the only water sold in World Duty Free shops in UK airports. Over 10 years One Water raised more than $20m, giving clean drinking water to 2.5m people.

Robinson believes business should be about enlightened self interest. Alquity has three core pillars: its first responsibility is good returns for its investors. “We need to deliver as good or better returns as a regular investment company like JP Morgan but with a ESG focus.”

In 2013 Alquity delivered a 15.3% return from its Africa fund while JP Morgan did 5.1% from theirs and Investec returns were negative.
While acknowledging that this doesn’t happen all the time, Robinson is keen to disprove the notion that investors aren’t giving something up in order to invest responsibly.

Such results are achieved through gaining a deeper undestanding of the businesses in which it invests. Robinson believes this approach is doubly important when you’re dealing with developing markets. “You need to see how the managers work and how transparent they are,” explains Robinson and gives the example of how far they’ll go: “One of our fund managers went to look at a car company manufacturing in Laos. It took six hours in a taxi just to get there from the airport. You have to do the work,” he emphasizes.
“Disclosure in Asia isn’t that good but we just don’t ask for it. We explain how disclosure wil help them. How Alquity will help them.”
The second pillar of the business is to secure a source of “Alpha”. That’s investment speak for opportunties that will give an extra return. “If you look at typical funds they’ll go for AAA rated stock. We look at A-C grade investments.”

Robinson is a firm believer that real benefits and returns come from stocks with momentum and that is found most in the journey of a company going from C to A. Alquity’s third pillar is transforming lives, with 25% of the fund’s C money going into micronfinancing schemes. “It’s about giving a hand up, not a hand out,” says Robinson. “I believe in capitalism in a meritocracy. You have to give everyone the chance to win as it makes no economic sense not to do so.”

In the last 12 months, Alquity has gone from one to five funds. His goal now is to grow those funds to critical mass so that they can all compete with the likes of Fidelity.

“If a fund is less than $50m, investors aren’t interested and it won’t open any doors,” he explains. The age of a fund is also important because investors like to see a track record of growth of at least three years.

The Africa fund is established at $60m but the newer ones are currently under $20m. The Asia fund has grown from $4m to $20m in the last 12-18 months and the India fund has grown from $1m to $8m.

In 10 years time, Robinson is convinced everyone will invest the ESG way. He is realistic enough to know that Alquity isn’t going to change Africa on its own but firmly believes it has a really good chance of changing the industry.  




Africa | SRI

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