TWENTYFOUR SUSTAINABLE SHORT TERM BOND INCOME AQG

Investment Process

TwentyFour believes that investing in shorter-dated and higher-quality bonds should reduce the volatility associated with spread and interest rate risk. This will increase the probability of a positive return for investors. Manager Chris Bowie also believes that ESG factors impact the future performance of credit assets. TwentyFour expects significant capital will continue to flow into sustainable businesses, thus generating positive returns for bond investors. The investment process for this fund is very similar to the TwentyFour Absolute Return Credit (ARC) fund, but with additional ESG screens. The funds are built using a core portfolio of 0–5-year investment grade credits, which are selected from TwentyFour’s Observatory database on a bottom-up basis. This core portfolio accounts for at least 2/3rds of the fund, with the manager having the flexibility to invest tactically for the final 1/3rd in credit or government debt high yield (BB- minimum credit rating) or ABS (max 20%). The weightings are determined by top-down asset allocation, which is actively managed by the team. The negative screens are straightforward, excluding Tobacco, Alcohol, Gambling, Adult Entertainment, Controversial Weapons, Carbon Intensive Industries, or Animal Testing for cosmetic purposes. If an individual company is showing positive ESG momentum it may be included in the portfolio. Nuclear energy is not automatically excluded as TwentyFour sees it as having a key role in the transition to net zero. The positive ESG scoring model uses Asset4 ESG data and team overlays to give each individual issuer in their Observatory an ESG score. There is also analysis of how issuers rank amongst their sector peers. All company meetings and engagement about ESG are recorded within their database. ESG factors will impact an overall bond’s ESG score, meaning if it scores below a score of 34 it cannot be held in the portfolio.