ebi’s investment product manager Jonathan Griffiths talks to Natalie Kenway in this Green Dream episiode about an adviser-first mindset, launching a fund of impacts ETFs and how artificial intelligence will change the investment industry.
Watch the full video interview above and read the transcript below.
NK: Hello and welcome back to the Green Dream. I am Natalie Kenway, and today I’m joined by Jonathan Griffiths from ebi. Thank you so much for your time today. Just tell us quickly about your role and where you’re dialling in from today.
JG: I’m John Griffiths I’m investment product manager DP where I’m responsible for investment communication and investment research. I’m dialling in today from Linlithgow, which is a small town near Edinburgh.
NK: Okay. Fantastic. Well, thank you for your time. For those that don’t know, could you give us a quick overview of ebi and how this differs from other investment firms? What would you say is your USP?
JG: We’re ebi, a discretionary fund manager (DFM) based in the Midlands focused on delivering evidence based, sustainable and low-cost portfolios. We were founded back in 2010 out of a wealth management business being run by our CEO Craig Burgess, and he was looking for a low cost, evidence based investment provider for his clients but couldn’t find one. So he set up ebi. And today we one of the fastest growing DFMs in the industry, with AUM of around about £3bn and growth of about £1bn in AUM over the past 12 months.
But 80% of our AUM is in factor-based and ESG-screened Earth portfolio suite, which, like most of our suites, is available in different equity and fixed income combinations ranging from 100% bond to 100% equity. In terms of how we defer to other investment firms, I’d say firstly we have an evidence based, factor based mindset, means we adopt a buy and hold approach, using low cost and primarily index tracking funds.
This sets us apart from many DFMs who of course lean more towards the active side. Secondly, I’d say that our CEO Craig’s experience as a financial advisoer has meant that we’ve been able to really build solutions that meet, our clients, who are mostly financial advisors, needs. So we adopt a truly adviser-first mindset.
And then finally, technology is really among the best of our peers. this includes our Vault platform, which provides access to marketing materials, interactive charts, and presentation tools for our portfolio, supporting advisers when they sit down with clients, as well as, advantage rebalancing algorithm, which adopts a tolerance-based approach rather than a calendar-based approach to rebalancing, which we found delivers a premium to returns over the long run, resulting from reduced trading costs, and reduced time out of the market.
NK: Okay, fantastic. I wanted to ask you about how the evidence-based investments and sector-based investment, how that works in practice. I know you touched on that then, but perhaps you can talk about that, how that’s reflected in the portfolios that you run.
JG: Ebi stands for evidence based investing, and this really is an investment approach which is based on using decades of academic research to determine what truly works in terms of delivering long-term investment outcomes. This points to a buy and hold approach primarily using low cost index tracking funds as part of a strategic asset allocation, rather than seeking to outperform the market through shorter term tactical timing or security selection.
And then factoring investing, this is an approach that involves targeting quantifiable characteristics, factors that can explain differences in security returns. So a factor-based approach involves tilting portfolios towards specific factors that history has shown have provided a risk-adjusted return premium compared to the wider market over the long run. I won’t go into the nuts and bolts of factor based approach, but just to mention some of the most commonly observed factors, and those which we seek to tilt to in a sector based portfolios… So they are value: I think most people are aware of that, so securities with lower prices relative to that fundamental value size and securities with lower market capitalization. Then momentum; securities that have outperformed in recent time periods. Minimum volatility: securities that demonstrate lower volatility over time. Then quality: securities that demonstrate higher profitability and resilience. So we operate a number of portfolios where factor investors at heart and our flagship Earth suite is a factor-based portfolio.
But we do also offer pure passive and screened passive portfolio as well, for example.
NK: I noticed in some recent market commentary that you talked about artificial intelligence. How do you think this will support or advance the sustainable investment universe? And what do we need to be mindful of at the same time?
JG: It’s a topic on many, people’s minds and investors’ minds at the moment. of course, following the launch of ChatGPT, which is about 18 months or so ago, as well as then the success of chipmaker Nvidia, which of course produces the chips widely used across AI models. Here at ebi, broadly speaking, we view AI, of course, as a disruptive technology which, like technological disruptors before it, is likely to lead to a reshaping of industry and wider society to some extent.
It’s like a wave, really. You can either choose to surf it or be washed away by it. We’ve been engaging with AI and some of the ways we’ve done so include on the programming front, so coding, where it can be very useful in suggesting solutions when you’ve, had a bit of a brick wall and then the solutions can be tested thoroughly and if appropriate, then implemented.
For me personally, I write quite a bit of longform content articles and thought pieces, for example. Now, I’ve not found AI overly useful in producing content itself. However, there are ways in which it can be useful. For example, providing ideas on a topic from different perspectives, such to try and ensure that you capture these different perspectives and address the whole of your audience in in your writing.
There’s a number of different ways in which it really can be useful.
And then when we look at the sustainable investment industry more broadly, we’re seeing the integration of AI at a number of different levels. We’re seeing AI chat bots pop up all over the place. You see them implemented into software, for example, Morningstar Direct, they’ve implemented the chat bot, that’s one example.
We’re seeing AI tools being incorporated into investment analysis and selection. So helping investors more efficiently sort and prioritise data to get to the heart of companies’ sustainable efforts. It’s a truly fascinating space, we’re excited to see how the coming months and years develop again, noting that AI does appear to be on quite an exponential trend. Some of the changes we see, you really could have quite short periods, short time periods, and may surprise is already the extent of them and the magnitude of them. They’re excited to see how things develop from here.
NK: That’s super interesting. And yes, I’m pleased to hear that you have found some uses for content, but not entirely replacing the writing part, so it’s good to hear for me.
SDR is another big topic in our industry, or a very important regulation, that’s being rolled out. This is also being considered by the FCA, which is consulting on expanding this to the portfolio management space. Do you have any general comments around that or particular concerns?
JG: It’s obviously been a busy year on the regulatory front. SDR and anti-greenwashing broadly speaking we welcome the regulation, and believe that it’s bringing much needed clarification and positive changes to the industry, including that important clampdown on greenwashing. And just a greater transparency around sustainable investing. So, 1 May, we saw the anti-greenwashing rule come into force – that really tightened up requirements for FCA authorised firms in relation to sustainability claims, stating that these claims must be clear, complete, correct and capable of being substantiated. And that is now obviously live and enforced.
It was great also to see the FCA release their consultation paper. A few months ago, in terms of extending SDR and the investment labelling regime to portfolio managers such as ebi.
And we responded to the consultation in conjunction with Parmenion, and we look forward to receiving the FCA comments, in response to this. And then the publishing of the finalised guidance in due course.
In the meantime, internally at Ebi, we have working group set up and focused on still implementation. we’re looking forward to the end of this month, the end of July, which is the go live date for labels for UK domiciled funds. So we get to see the lay of the land for the funds landscape in terms of labelling at that point ahead of the implementation of the rules and for portfolio managers such as those a bit later down the line.
It’s been a very busy period. I think we have been extremely, extremely busy with the range of consultation papers and legislation and we are looking forward to seeing how things pan out over the coming months.
NK: Me too. Okay, I’m back to ebi. What’s the plans for the future? Where do you imagine the business will be in a few years’ time?
JG: We remain in constant dialog with our clients in relation to their needs and what they’d like to see from us. This has led to the launch of a number of new portfolios recently from our side, including our SRI portfolio suite, which follows a socially responsible investment approach, and our Cash Plus portfolio, which seeks to deliver a cash like return.
We’ve also then had feedback from clients seeking an impact-focused strategy. So this is something we’re currently working on. And we’re launching a passive impact strategy shortly, which invests in a range of global, impact ETFs on the equity side and then green bonds on the fixed income side. So we’re excited about this, and bringing,, an index tracking, impact focused strategy to market, which is quite a new and cutting edge concept.
But alongside that is, of course, servicing existing clients and just continuing, just a great growth trajectory that we found ourselves on over the past couple of years.
NK: Yeah, that is really interesting about the on the impact side with ETFs. We’dbe interested to hear more about that when you’re ready. Okay. We always end the Green Dream with this question – what is your favourite sustainable drink or snack.
JG: That’s a good question. yeah. It’s really interesting to consider the concept of what truly sustainable food or drink is. And when you take into account, all the different factors including pesticides, fertilizer use,carbon emissions, etc. I’d say my wife and I’ve been pretty active in the garden this year growing a range of fruit and veg.
We had our first strawberries a couple of weeks ago. It’s a bit later in the season, u0p here in Scotland, and they were delicious. So I’ll go with that: homegrown strawberries.
NK: I don’t think you can beat those. It’s so much more satisfying when they’re home grown on that. Well, thank you very much for your time. Great to chat with you, Jonathan.
JG: Thank you. Appreciate the time.
