• Scroll to view all countries

Please Choose Your Country

Welcome. This website is intended solely for the use of institutional investors, consultants and other professionally recognized financial intermediaries in specific countries. Intech Investment Management LLC (“Intech”), is an investment adviser registered with the United States Securities & Exchange Commission. Intech is not permitted to offer products and services in all countries. It is the responsibility of prospective investors to inform themselves of and to observe all applicable laws and regulations of any relevant jurisdictions, including the legal requirements and tax consequences within the countries of their citizenship, residence, domicile and place of business with respect to the acquisition, holding or disposal of shares or securities, and any foreign exchange restrictions that may be relevant thereto. The products and services referred to in this website are not offered to any person or entity in any jurisdiction where the advertisement, offer or sale of such products and services is restricted or prohibited by law or regulation or where we would be subject to any registration or licensing requirement not currently held by Intech or our affiliates. If Intech does not offer a website for your country, please visit www.janushenderson.com.

Australia Wholesale Client Confirmation

Not your country? Please choose your country here.

This Website is intended solely for the use of wholesale clients in Australia and their professional consultants and investment advisers and is not for general public distribution.

This material on this website is not intended for distribution to, nor should it be relied upon by, retail clients. If you are a retail or individual investor, then please leave this Website.

Intech is permitted to provide certain financial services to wholesale clients in Australia pursuant to an exemption from the need to hold an Australian financial services licence under the Australian Corporations Act 2001. Intech is regulated by the Securities Exchange Commission of the U.S. under U.S. laws, which differ from Australian laws.

The words ‘Intech,’ ‘we,’ ‘us’ or ‘our’ used herein refer to Intech Investment Management LLC (“Intech”), an investment adviser registered with the United States Securities & Exchange Commission, and ‘you’ or ‘yourself’ may refer to an individual, Independent Financial Advisor, consultant, company, or other entity visiting this website. This website is issued by Intech Investment Management LLC (“Intech”).

Unless stated otherwise, information on this web site is provided by the issuer of the applicable financial product.

Information contained on this Website is published solely for general informative purposes and should not be relied upon as financial product advice. This content has been prepared without taking into account the objectives, financial situation or needs of any person. Before making an investment decision you should consider the appropriateness of the information on this website having regard to these matters and where relevant read any disclosure document relating to a financial product. You should also consider obtaining independent advice before making any investment decisions.

This website is intended only for wholesale clients (as defined by section 761G of the Corporations Act 2001) in Australia and their professional consultants and investment advisers who are who are knowledgeable and experienced in the financial services market and in investment products of this nature.

Should you proceed to access this Website, you will be representing and warranting that you are a “wholesale client” as defined by section 761G of the Corporations Act 2001. The information is not authorized for use in a jurisdiction where distribution is not authorized and is not intended for distribution to retail clients.

In continuing to access or use Intech’s Website at intechinvestments.com (“Website”), you agree to be bound by the Terms of Use applicable to your use of this Website and any information obtained from it. If you do not agree to these Terms of Use, please do not use this Website or download or read content from it.

The information contained on this web site is believed to be accurate and current at the time of compilation and is provided in good faith. Intech does not accept any responsibility arising in any way (including negligence) for errors in or omissions from information contained on this web site or for any loss or damage (whether direct, indirect or otherwise) suffered by the recipient of the information contained on this web site, or any other person. Intech does not accept any legal responsibility for material published on third party linked sites.

What follows is not an offer or invitation to acquire an investment to, and should therefore not be relied upon by, any person anywhere other than Australia or any person in any jurisdiction where such an offer or invitation would be unlawful. Persons in respect of whom such prohibitions apply must not access this Website.

If you choose to access this Website from locations outside of Australia, you do so at your own initiative and risk, and are responsible for compliance with all applicable laws. Otherwise, please return to intechinvestments.com and choose the appropriate jurisdiction, where you will find investment products and services that are available to you.

This Website is reserved exclusively for non-U.S. persons and should not be accessed by any person in the United States. A “U.S. Person” is defined by U.S. laws and regulations in force from time to time. If you are resident in the U.S., or as a corporation or other entity are organised under U.S. law or administered by or operated for the benefit of a legal or natural U.S. person, you should take professional advice to determine whether you are a U.S. Person and you should not access this Website until you are sure that you are not a “U.S. Person”.

WE BELIEVE THAT THE INFORMATION THAT MAY BE VIEWED ON THIS WEBSITE IS ACCURATE AS AT THE DATE OF PUBLICATION, BUT WE DO NOT GUARANTEE THE ACCURACY OR CURRENTNESS OF THE DATA AND WE DISCLAIM ALL REPRESENTATIONS AND WARRANTIES OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSES, TITLE AND NON-INFRINGEMENT. FURTHERMORE, THE INFORMATION MAY BE AMENDED BY US AT ANY TIME WITHOUT NOTICE. BY PROCEEDING YOU AGREE TO THE EXCLUSION BY US, SO FAR AS THIS IS PERMITTED UNDER APPLICABLE LAW, OF ANY LIABILITY FOR ANY DIRECT, INDIRECT, PUNITVE, CONSEQUENTIAL, INCIDENTAL, SPECIAL OR OTHER DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF PROFITS, REVENUE OR DATA ARISING OUT OF OR RELATING TO YOUR USE OF AND OUR PROVISION OF THIS WEBSITE AND CONTENT REGARDLESS OF THE FORM OF ACTION, WHETHER BASED ON CONTRACT, TORT (NEGLIGENCE), WARRANTY, STATUTE OR OTHERWISE, AND REGARDLESS OF WHETHER WE HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IF YOU ARE DISSATISFIED WITH ANY PORTION OF THIS WEBSITE, OR OF THIS IMPORTANT INFORMATION, YOUR SOLE AND EXCLUSIVE REMEDY IS TO DISCONTINUE USE OF THIS WEBSITE.

If you are unsure about the meaning of any information provided on this Website, then please consult your financial or other professional adviser. We do not offer investment advice.

Cookies: This Website uses cookies to remember your preferences and to help us to improve this Website through the use of web analytics. By continuing without changing your cookie settings we will assume that you are happy to receive cookies for these two purposes. For full details on how to manage our cookies and how we use them, please see our Cookie Policy as well as the Cookies section within our Privacy Policy.


Decline - I am not a wholesale client

Mitigating human-induced climate change is one of our generation’s most significant challenges and has reached new heights of concern after a year of forest fires and flooding, of heatwaves and hurricanes. To help decarbonization efforts, many asset owners and asset managers have turned to low carbon investing. For instance, Intech and other signatories of the Net Zero Asset Managers Initiative intend to increase the proportion of assets managed in line with efforts to reach net-zero greenhouse gas emissions by 2050.

We fully recognize that our primary mission as an asset manager is to help you address investment challenges, not climate challenges. While that mission may be less weighty than global climate change, it’s no less critical for your stakeholders today. Unfortunately, some important investment solutions of our day, such as defensive, low volatility equity strategies, may appear objectionable to climate-minded investors.

Two imperatives of our day – decarbonizing and de-risking – appear to be on a collision course. Can you reconcile these objectives? What are the trade-offs?

Decarbonization Imperative

The climate change urgency intensifies each year, with rising greenhouse gas emissions contributing to the earth’s higher average surface temperature. We recorded one of the warmest years on record in 2020 – more than 1.2° Celsius (2 degrees Fahrenheit) higher than in 1880 (see chart below).1

2020 TIED FOR WARMEST YEAR ON RECORD

Paleoclimatology tells us that the earth’s temperature has been relatively stable, but since the dawn of industrialization, the atmospheric concentration of greenhouse gases like carbon dioxide has been rising as we burn fossil fuels such as coal, oil, and natural gas.2 These pollutants absorb sunlight and solar radiation that would typically bounce off the earth and into space, trapping the heat and warming the planet.

If we continue to see an unabated rise in greenhouse emissions, extreme weather events and rising sea levels will persist, which have had and will continue to have widespread economic consequences.

De-risking Imperative

With bond yields at all-time lows and allocations to less-liquid alternatives already high, equities’ role in helping fund and pay future liabilities, or grow participant savings balances, is increasingly crucial. Unfortunately, unprecedented uncertainty at today’s lofty market levels makes it increasingly difficult for investors to stay the course with equity-dominated portfolios.

Rather than reducing equity allocations, some investors are seizing the opportunity to de-risk them. By replacing part of your core equity holding with a defensive, low volatility strategy, you have the potential to reduce overall portfolio volatility and mitigate drawdowns while at the same time preserving long-term return expectations and portfolio liquidity.

Derivatives' Drawbacks

If you assume traditional low volatility equity strategies have to be high carbon portfolios, why not instead turn to derivatives as a means of defensive equity investing?

Derivative strategies, such as purchasing a put option, a put-spread, or a zero-cost collar, are akin to buying fire insurance for your house. The policy may be replete with caveats and generally doesn’t pay off until your home has burned to the ground. Instead, low volatility strategies help prevent your house from burning down in the first place – they act more like fire-retardant materials, attempting to add a layer of resiliency against a potential fire. They should be included as foundational elements when constructing an equity allocation.

What’s more, derivative approaches have performance costs that can rise rapidly in proportion to market volatility, timing precision, and willingness to roll the strategy forward. In contrast, low volatility strategies may lag the general market in some periods, but over the long-term have historically offered market-like returns. They also have predictable, asset-based fees that are typically lower than most traditional active-risk strategies.

The illustrations below make a simple, cyclical case for low volatility investing. Low volatility equities have historically offered market-like returns with a quarter less volatility than a cap-weighted benchmark, allowing for better compounding over time. But the recent market environment has led to record under-performance for low volatility investing. That makes allocations to defensive equity especially compelling today.

Low Vol vs cap weighted returns

High Carbon, Low Volatility Stocks

Low carbon and low volatility investing are seemingly incompatible visions, especially if you tie the benefits of low volatility investing to holding low volatility stocks. Through that lens, low volatility investing might produce a portfolio of very high carbon emitters, underscored by a significant overweight to the utilities sector.

S&P helps illustrate this perceived problem, since they employ a stock-driven approach to creating the S&P 500 Low Volatility Index. The Index selects the least volatile stocks and weights them in inverse proportion to that same metric. Consequently, relative to the S&P 500 Index, the S&P 500 Low Volatility Index has a 15% overweight to utilities – a sector with the highest relative carbon intensity – while significantly underweighting sectors with low relative carbon intensity (see charts below).

STOCK-DRIVEN LOW VOLATILITY APPROACH OVERWEIGHTS HIGH CARBON EMITTERS

Harmonizing Low Volatility and Low Carbon Investing

Low volatility and low carbon investing do not seem compatible using this approach. And we wouldn’t blame anyone for holding this notion; after all, given years of rising equity markets, few investors have seriously examined the advancements in low volatility investing. Leaders in low volatility equity investing sought to address similar types of concentrated risk exposures a long time ago. Handling the problem of overexposure to high carbon emitters should be no different. To find out how this is possible, download this important resource for defensive equity investors, “Can You Make Low Vol and Low Carbon Investing Compatible?”

Harmonize Low Carbon and Low Volatility Investing How to decarbonize and de-risk concurrently Learn More

 

 

1. 2020 Tied for Warmest Year on Record, NASA Analysis Shows. (2021). Retrieved 14 October 2021, from https://www.nasa.gov/press-release/2020-tied-for-warmest-year-on-record-nasa-analysis-shows.

2. USGCRP, 2017: Climate Science Special Report: Fourth National Climate Assessment, Volume I [Wuebbles, D.J., D.W. Fahey, K.A. Hibbard, D.J. Dokken, B.C. Stewart, and T.K. Maycock (eds.)]. U.S. Global Change Research Program, Washington, DC, USA, 470 pp, doi: 10.7930/J0J964J6

The information expressed herein is subject to change based on market and other conditions. The views presented are for general informational purposes only and do not purport to address the financial objectives or specific investment needs of any individual reader, investor, or organization. This information should not be used as the sole basis for investment decisions. All content is presented by the date(s) published or indicated only, and may be superseded by subsequent market events or other reasons.

Past performance is no guarantee of future results. Investing involves risk, including possible loss of principal and fluctuation of value. Information that is based on past results or observations is not necessarily a guide to future results, and no representation or warranty, express or implied, is made regarding future results.

Index returns do not reflect transaction costs or the deduction of fees. It is not possible to invest directly in an index.

There is a risk/reward tradeoff that comes with investing in low volatility strategies. These strategies are likely to underperform the index especially in strong up-markets and there is a possibility they will not achieve the desired level of protection in down markets.

Investments are subject to certain risks, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein, if shown. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This material has not been approved, reviewed, or produced by MSCI.

S&P 500 Dow Jones Indices LLC and/or its affiliates make no express or implied warranties or representations and shall have no liability whatsoever with respect to any S&P data contained herein. The S&P data has been licensed for use by Intech and may not be further redistributed or used as a basis for other indices or any securities or financial products. This material has not been approved, reviewed, or produced by S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC's indices, please visit www.spdji.com.

Related Posts

Top Blog Posts - 2022 Year in Review

Low Volatility? Exactly What Kind of Volatility Are We Talking About?

Finding Limits to Asset Class Diversification? Take Another Look at Your Equities.

2025 Intech ©. All rights reserved.

Privacy Policy | California Privacy Notice | Terms of Use | Cookie Policy