What is your role at Federated Hermes?
I’m a Deputy Fund Manager on the Biodiversity Equity Strategy, and a Senior Investment Analyst on our Impact Opportunities Strategy.
How did you get started in your career?
After my undergrad at Oxford University and masters at UCL, I worked at Sanford Bernstein in equities research for nearly four years. This provided an excellent grounding in the fundamentals of company and industry analytics, and I specifically sought out Bernstein for its strong collegiate culture and focus on long-term, through-cycle investment analytics.
I’ve always wanted to work on the buyside, and had the opportunity to join a small, startup hedge fund in 2017 focused on energy and industrials, which was a great introduction to investing. As part of that role, I was given responsibility to manage part of the book dedicated to sustainable energy and industrials names, sowing the seed of my interest in impact and sustainable investing, and ultimately precipitating my move to Federated Hermes in 2020.
What do you enjoy the most about your current role?
For me, it’s the confluence of partnering an investing role with the mission of generating real impact through our strategy. There’s a real thrill and excitement in engaging with and owning businesses, going up the curve of conviction to building a thesis and getting the validation of seeing that demonstrated in the reported operations, corporate actions, and ultimately shareholder return. Marrying that with investing in businesses where we can demonstrate the impact that they are having on biodiversity outcomes, generating both returns and impact, adds another layer of enjoyment, passion and motivation.
How would you characterise your style as an investor?
Simply put, I would characterise my investment style as ‘growth at a reasonable price’ (GARP) with a quality bias, with a medium-to-long term horizon. The biodiversity, and more broadly impact, opportunity set is one which is clearly growth laden, but for me the absolute key is to ensure that we are getting a fair deal for growth in terms of valuation, and that there is certainty around the quality of the business to ensure that we can be confident that we will see the economic return which we are paying for.
On top of this, I like to think there’s a healthy dose of pragmatism in my style. I think that means different things to different investors, but understanding the perimeters of our opportunity set is something that I really challenge myself to do, and I’m constantly thinking and rethinking the best paths to optimise our path through it.
Understanding the perimeters of our opportunity set is something that I really challenge myself to do, and I’m constantly thinking and rethinking the best paths to optimise our path through it.
When you’re considering making an investment what key metrics or attributes do you look for the most?
For the Biodiversity Strategy, it’s a two-step process. First, we have to ask: can we consider this business to be a true ‘Biodiversity Champion’? Is its core competence either providing a solution to biodiversity loss, or in its mitigation of biodiversity risk? This can be done through qualitative research and quantitative analysis.
Secondly, is the stock accretive to the portfolio? Does it help improve on what we already have? To gauge this, I use a five factor model based on the following:
- The price of growth to value
- The returns over cost of capital of the business, or ‘quality’
- The position in the earnings cycle
- The correlation of the stock versus existing holdings
- The momentum drivers of the stock
This dispassionate model supplements the detailed, rigorous work that we do on the stock itself to really try to understand the business and whether it has durable competitive advantage, and whether it may be mispriced in the market. The confluence of all of this is a system designed to, and capable of, generating ideas with real portfolio level value.
Same question as above but for exits from the portfolio: What would trigger a sale or an exit of a holding?
I think there can be a couple of drivers that would trigger a sale or exit. Firstly, and the most satisfying, is the natural completion of the thesis; when the models show we have harvested the best of the mispricing opportunity or cycle, and that we have an able replacement in the chamber to substitute in. The second would be on relative valuation – that we see better opportunities to deploy capital elsewhere. The third, and most important, reason is for a challenge to have come up in the thesis, or for there to have been a fundamental change in the risk-reward. It’s clearly a challenge to parse through these cases when they occur, and over time we have certainly improved our speed of triage, analysis and decision making in such cases.
What are the strengths of the Biodiversity team?
It’s hard to keep this brief, as I feel really fortunate to work with such a talented and excellent team. But, there are three points I’d illuminate here.
- Analytical rigour: I think each of us have been grounded in solid technical fundamentals.
- Diversity of thought: We have all come from different paths, with different sectoral specialties, and we have a great culture on the team of recognising each other’s strengths and emboldening each other in them.
- Motivation on impact: Impact and biodiversity investing is not easy – it requires patience to sift through names, find the true champions, and find the businesses we really want to own, at the right price. Key to this is that we all deeply care about biodiversity outcomes in the real world, and this goal embodies the patience required to navigate this space successfully.
What’s special about investing in biodiversity? Why should investors consider adding an allocation to their portfolios?
‘Impact-aligned’ sectors act as a pretty efficient and rather comprehensive net to cast over the market to identify growth-end markets, in an economy where growth is ever more scarce. Biodiversity is a subset of this, and offers a compelling opportunity for investors for three reasons. Firstly incoming regulation is set to dramatically increase the total addressable market for many product solutions. Secondly, this is an opportunity set of quality names where we see solid value for the growth opportunity on offer. Finally, this is a set of sub-sectors that we believe is well primed for cyclical inflection in 2024/25.
What are your interests outside of work?
I’m a quite big sports and music fan, so I like to spend my time either travelling around the country following two slightly disappointing football teams, watching cars drive around in circles, or meeting up with friends to see bands. Aside from that I absolutely love snowboarding, and am trying to improve my surfing!
Read our latest Biodiversity Equity Interim Report here.
To find out more about our Biodiversity Equity Strategy, please click here.
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