Prudential have recently launched 5 new funds with an ESG (Environmental, Social and (corporate) Governance) focus, the PruFund Planet range of funds. This is good news and indicates the general direction of travel for fund managers. We see existing funds moving in this direction as well as a constant stream of new funds being launched with an ESG label on them.
PruFund Planet’s fund range is different in that it has the unique ‘smoothing’ element and is managed by M & G’s Treasury & Investment Office, the same team that manage the existing PruFund range of funds that launched originally in 2004. They have a good long term track record.
Prudential are gradually integrating an ESG focus into the old PruFund range of funds through engagement with the existing underlying businesses and funds they are invested in. There are c 5,000 different investments in PruFund Growth.
PruFund Planet is being launched with £500 million in seed capital, £100 million per fund. For standard funds (not multi asset smoothed) this might be a reasonable amount of money for a new fund to get started. I’m not sure that this is enough for a ‘smoothed’ fund when compared to the scale of PruFund Growth.
The problem (or the good news!) is that PruFund Growth is exceptional in terms of scale, leverage and buying power in markets. The investment fund can write big cheques for large infrastructure projects, private equity and private credit. This differentiates the fund, and allows it to invest in assets that will provide a good return, in turn helping to hold up the Expected Growth Rate (EGR).
Pricing of PruFund Planet funds at 0.65% fund management charge is the same as the existing ‘smoothed’ funds. This is competitive for this multi asset fund. The Expected Growth Rates of PruFund Planet funds are in line with their existing (original) smoothed fund peers initially. I can see divergence of these in the future.
Summary
We are still conducting our due diligence and undertaking additional research on these funds. Ideally, I would like the comparable fund to perform similarly to PruFund Growth. This would offer the best risk/reward potential.
For now, I think it would be very risky to wholly invest in one of the PruFund Planet funds. Once we complete our research and due diligence, it might be appropriate to invest a small proportion of your invested assets into PruFund Planet funds.
It’s a nice option to have for the future, particularly for those of us with an ESG focus.
Steve Speed
17/08/2021