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Investment Manager, Strategy and Exclusionary Screens

April 29, 2022

Pendal Sustainable International Share Fund (APIR: BTA0568AU, ARSN 612 665 219)

Investment Manager, Strategy and Exclusionary Screens

We have decided to replace AQR Capital Management, LLC (AQR) as the investment manager of the Fund and bring management of the Fund in house, leveraging the expertise of Pendal Group’s global equities teams. The change will take place on or around 31 May 2022.

The Fund will continue to be an actively managed global equities portfolio. The portfolio will typically comprise around 90 stocks (though this will fluctuate over time), blending the Pendal Global Select and Pendal Sustainable Concentrated Global Shares strategies with a much stronger focus on fundamental stock analysis. There will also be enhanced scope for company engagement and the incorporation of ESG and sustainability considerations in the management of the Fund.

The exclusionary screens of the Fund will be enhanced consistent with broad market feedback around the screens required for a contemporary sustainable strategy, improving the Fund’s sustainability footprint by tightening the screens for fossil fuels and weapons.

The Fund will avoid investing in companies which directly:

  • extract or explore for fossil fuels (specifically, coal, oil and natural gas); or
  • produce tobacco (including e-cigarettes and inhalers); or
  • manufacture controversial weapons (such as cluster munitions, landmines, biological or chemical weapons, nuclear weapons, blinding laser weapons, incendiary weapons, and/or non-detectable fragments).

The Fund will also avoid investing in companies which derive 10% or more of their total revenue directly from:

  • fossil fuel-based power generation, or fossil fuel distribution or refinement (coal, oil and natural gas)*;
  • the production of alcoholic beverages;
  • manufacture, ownership or operation of gambling facilities, gaming services or other forms of wagering;
  • manufacture of non-controversial weapons or armaments;
  • manufacture or distribution of pornography; and
  • uranium mining for the purpose of nuclear power generation.

* Companies with a climate transition plan may be exempted from this exclusion, provided that they have in place a Paris Agreement aligned transition plan and produce climate-related financial disclosures annually, which in both cases we consider credible. We define fossil fuels as coal, oil and natural gas.

Why are we making the change?

We have decided to implement these changes because we believe it is in the best interests of investors to bring the management of the Fund’s international strategy in-house, following a review of the Fund’s existing external investment manager, AQR. We expect the changes will deliver improved investment and sustainability outcomes for the Fund, providing investors with better risk-adjusted returns over the medium to long term.

What will stay the same?

The Fund’s investment objective, benchmark, management fee and buy-sell spread will remain unchanged.

What do you need to do?

No action is required. You will be able to continue to invest or withdraw from the Fund.

An updated Information Memorandum (IM) reflecting the change in investment manager, investment strategy and exclusionary screens is available on request. If you would like a hard copy of the IM, please contact us.

If you have any questions about your investment or would like further information regarding the changes, please contact our Investor Services Team on 1300 346 821 (for Australian investors) or +612 9220 2499 (for overseas investors) from Monday to Friday, 8.30am to 5:30pm (Sydney time). For any questions regarding how this change may impact your own financial situation we recommend that you speak to your financial advisor and/or tax accountant.

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