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Roger Pim, Global Head of Private Markets Product Strategy & Solutions at Aberdeen Standard Investments, explains how the Global Sustainability Trust (GST) aims to achieve an attractive return for investors

You’ve said that the Global Sustainability Trust will aim for an internal rate of return of 6-8% a year, net of fees. Why have you chosen that as the target return?

Our goal is to create a fund that can deliver good financial returns as well as positive social and environment impact.

But we also wanted to ensure that the Global Sustainability Trust could be a core holding for private investors rather than a high-risk or niche offering that’s only suitable for institutions or very high net worth investors.

We believe that the GST’s target return of 6-8% per year* through a typical market cycle represents an attractive risk adjusted return and reflects the diversified private markets portfolio we are looking to build on behalf of investors.

*This is an internal performance target which the Investment Manager aims to achieve as at the date of this document. This target is not based on past performance, may be subject to change and cannot be guaranteed.

The portfolio is focused on private market assets – what returns do you expect these different private market elements to achieve?

The exact returns will depend on the specific investment opportunities and past performance is no guide to the future, However, based on our experience we would anticipate private equity impact investments generating low double-digit net returns . In infrastructure, you’d expect a range from 6%-8% for social infrastructure such as hospitals, schools and housing rising to 8%-12% for economic infrastructure such as energy, telecommunications and transportation. In real estate, the return can vary enormously depending on how much development risk you take on. We are building a broadly diversified portfolio which is expected to generate a blended return of 6-8% per annum.

What’s the expected volatility profile of the portfolio?

Because we want the Global Sustainability Trust to be viewed by investors as a core part of their portfolio, we’re keen to keep volatility relatively low.

The portfolio is widely diversified across the various private market asset classes – private equity, infrastructure, real estate, natural resources and private credit – which typically have a lower correlation to traditional asset classes such as equities. This should help to reduce volatility and provide portfolio diversification. We will also carefully monitor and manage risk exposures across different geographies, sectors and currencies.

Our focus on private markets may also help to dampen volatility. In private markets, you’re not exposed to daily or hourly price fluctuations in the way that public stock markets are. Instead, assets are valued through a well-established and transparent process, typically on a quarterly basis. As a result, the underlying net asset value of the portfolio may well experience less volatility.

Also, as the owner of a private asset you can invest with a long-term mindset. You can help to ensure the appropriate strategy is followed to achieve the desired environmental and social impact and associated measurement and reporting. Plus if necessary, you can take direct and immediate action to manage its performance in a way that you simply can’t as a public shareholder in a company.

Combining all these features, it’s possible to build a lower volatility portfolio that potentially delivers attractive returns as well as delivering clear and measurable positive environmental and social impacts.

What income yield are you looking to achieve?

We’re suggesting a yield of 2-3% at this stage. Private equity impact investments are predominately growth focused; however, infrastructure and real estate are likely to generate a reasonable yield where assets are generating steady and reliable income.

Interestingly, investors aren’t pushing us to pay dividends: they are more interested in a strong financial return over the longer term. However, because this isn’t a yield-focused fund, there’s no need for us to seek out investments that are paying out money from day one. Instead, we can concentrate on investing in the opportunities that we believe will generate the most attractive returns and a strong positive environmental and social impact.

Important Information

Risk factors you should consider prior to investing:

  • The value of investments and the income from them can fall and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • The Company’s investment portfolio may not achieve the desired positive measurable environmental and/or social impact.
  • The Company’s investments are inherently illiquid.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • An investment in the Company is only suitable for investors who are capable of evaluating the merits and risks of such an investment

 and who have sufficient resources to bear any loss which might result from such an investment.

  • The success of the Company will depend, amongst other things, on the Investment Manager’s ability to identify, acquire and realise investments in accordance with the Company’s investment objective and policy. This, in turn, will depend on the ability of the Investment Manager to apply its investment processes in a way which is capable of identifying suitable investments for the Company to invest in. There can be no assurance that the Investment Manager will be able to do so or that the Company will be able to invest its assets on attractive terms or generate any investment returns for Shareholders or avoid investment losses.

The Company is an alternative investment fund for the purposes of the AIFM Directive and has appointed Aberdeen Fund Managers Limited as its alternative investment fund manager.

Domicile and legal form: The Company - The Global Sustainability Trust plc was incorporated and registered in Scotland on 17 April 2018 as a public company limited by shares under the Companies Act with registered number SC594582.

Typical investor

The Directors believe that the typical investors for whom an investment in the Company is appropriate are private investors and institutional investors investing for capital growth and seeking exposure to a diversified global portfolio, primarily consisting of Private Market Investments, which aims to create positive measurable environmental and social impact. An investment in the Company is only suitable for persons capable of evaluating the risks and merits of such an investment and who have sufficient resources to bear any loss which may result from the investment. Potential investors should consider with care whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them.

Investors may wish to consult an independent financial adviser who specialises in advising on the acquisition of shares and other securities before making an investment.

The AIFM and Investment Manager

Under the terms of the Management Agreement, the Company has appointed Aberdeen Fund Managers Limited as the Company’s alternative investment fund manager for the purposes of the AIFM Directive. The AIFM has delegated portfolio management to Standard Life Investments Limited as Investment Manager.

Other important information:

Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419.

An investment company should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.

Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

We recommend that you seek financial advice prior to making an investment decision.

Investors should review the relevant Key Information Document (KID) and brochure prior to making an investment decision. These can be obtained free of charge from www.invtrusts.co.uk or by writing to Aberdeen Fund Managers Limited, PO Box 9029, Chelmsford, CM99 2WJ.

For more information, please visit http://www.globalsustainabilitytrust.co.uk/

GB-291018-75706-1

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Issue Date: 27 Nov 2018