A group of fund managers from Fidelity Institutional Asset Management and Stewart Investors has launched Aikya Investment Management, a boutique asset manager dedicated to sustainable investing in emerging market (EM) equities.
The founding members from Fidelity include Rahul Desai, a former portfolio manager, and Trevor Fung, a former senior analyst. The former Stewart Investors team members include Ashish Swarup, Tom Allen, Alan Nesbit, Michael Summers and Alex Khosla.
“The majority of the Aikya team have all worked closely together on emerging markets strategies at leading investment firms, allowing us to forge strong relationships and gain an intricate understanding of the compelling investment opportunities within emerging markets across the globe,” Swarup said in a statement.
Aikya is majority-owned by its investment team, and Australian investment firm Pinnacle Investment Management Group Limited is a minority equity partner. Pinnacle is providing non-investment support functions, including a staff of 30 located in London; New York; Sydney; Melbourne, Australia; and Auckland, New Zealand.
Aikya’s flagship Global Emerging Markets strategy comprises a concentrated portfolio of 30 to 35 companies, and sustainability is central to the company’s investment approach. The firm said it won’t allocate capital to industries with “negative social utility” such as coal, gambling, tobacco, and defense industry firms.
The company said it chose the name Aikya because it means oneness in Sanskrit, and that its core belief is that true stewards align their businesses with the interests of all stakeholders.
“We will be taking the analysis of stewardship to the next level—incorporating analysis of environmental, social, and governance [ESG] related issues with as much rigor as traditional financial metrics,” Desai said. “Our investment approach enables us to ignore thousands of sub-standard companies that make up the emerging markets universe, and instead focus on building a highly concentrated portfolio of only the best.”
According to the firm’s founding principles, its purpose is to generate healthy long-term returns with strong downside risk protection.
“Risk for us is the possibility of permanent loss of capital rather than underperforming a benchmark in the short term,” the firm said. “An absolute return mindset allows us to focus on companies with the best quality management teams, without wasting time on the hundreds of other companies in the emerging markets universe.”
Aikya said that while it looks at a company’s financials and franchise strength in detail, its main interest is in assessing the quality of people behind the business.
“We look for long-term stewards who have grown cashflows, navigated a few economic cycles, and demonstrated fairness to all stakeholders,” the company said. “The stewards we back have the qualities to identify sustainable growth opportunities and on occasion turnaround underperforming assets. Such people create shareholder value and drive long-term investment returns.”
The company added that it believes that the business groups that effectively address ESG risks will be “long-term winners.” It also said it believes in active engagement and will discuss critical sustainability issues with top management.