Trillium Asset Management – Edinburgh

Trillium Asset Management is an impact driven, ESG focused investment firm with over $5.6 billion in assets under advisement as of 12/31/21. The firm delivers equity, fixed income, and alternative investments to institutions, intermediaries, high net worth individuals, and other charitable and non-profit organizations with the goal to provide positive impact, long-term value, and ‘social dividends’. With the aim of aligning stakeholders’ values and objectives, Trillium combines impactful investment solutions with active ownership. Headquartered in Boston, the firm opened its Edinburgh office in 2021 to manage a suite of global ESG-focused equities strategies.

Ian Warmerdam

Ian Warmerdam, Lead Portfolio Manager, joined Trillium in April 2021 and oversees the management and portfolio construction for global equities ESG strategies. He was previously Head of Global Equities (2014 – 2021) at Janus Henderson Investors, which he joined in 2001. Prior to that he was briefly at Scottish Widows and Scottish Life. Ian earned a BSc in technology and business studies from the University of Strathclyde and MSc in investment analysis from the University of Stirling. He is a member of the CFA Institute.

Jamie Mariani

Jamie Mariani joined Trillium in 2021 and co-manages the ESG Global Conviction strategy.  Jamie previously worked at Martin Currie for more than a decade where he was a global sector manager with responsibility for TMT stocks. He joined from Bryan Garnier & Co., where he was head of telecoms. Prior to that, Jamie was a sell-side analyst at both Dresdner Kleinwort Benson and ABN AMRO, where he was the Director of the telecoms team. Jamie is a CFA charterholder and a member of the CFA Institute.

Trillium globally has AUM of $5.6 billion and the Edinburgh team manage seed capital in a global unconstrained ESG strategy?

We are currently running the strategy with seed capital from our parent company – Perpetual (which acquired Trillium in 2020) and looking to raise capital externally. It is early days for Trillium with a physical presence outside the US.  We launched the strategy in July 2021 and expect new vehicles to be launching this year in Europe and other geographies where Trillium and Perpetual have a presence.

All in equities?  All long only?

Yes, and yes.

Geographic split of AUM?

We prefer to think about geographic exposure in terms of fundamentals; where the companies owned in the strategy generate their sales and incur their costs, rather than country of listing, which can be potentially misleading.

Exposure: we are bottom-up stock pickers so that will dictate the geographic split of our assets will be dynamic and fluid. That said, currently we have ~70% of the strategy in the US, <20% in Europe and the remainder for Asia and LatAm.

Target figure for AUM for Edinburgh’s global unconstrained ESG strategies?

While we are not publicizing our detailed operating plans, I was responsible for the lead management of over a billion dollars at Janus Henderson. We are confident that we can manage $10 billion plus without compromising our investment principles or expectations of outperformance.

25 – 40 holdings – correct?

Yes. We run a high conviction, concentrated portfolio, non-indexed.  We currently have 31 positions.

Is the team split by sectors and/or geographies?

We are all global generalists.  We can go anywhere in the world, any market cap (within reason), any geography.  Long term investment criteria.  But there will be certain sectoral biases and certain interest areas.

How will you work with other Trillium offices?

As background, the existing Trillium equity strategy platform is focused on being more diversified and core-oriented, with a mid-term investment horizon. We are much more concentrated, have a growth bias and a longer-term investment horizon.  The Trillium team have a 40-year history and expertise in ESG and more specialty resources including a world leading shareholder advocacy team. We have a dedicated ESG specialist based in Edinburgh who works closely with the team in the U.S.  So, although we are one entity when it comes to ESG and advocacy, we manage our own idea generation, investment research, and portfolio construction.

If a stock is on your buy list – would it also be bought for the firm’s other strategies in Boston for example? 

All ideas are ‘approved’ from both ESG and fundamental perspectives across Trillium. We might originate an idea for the approved list, but each individual portfolio management team constructs their strategies according to prescribed investment objectives and style, unrelated to other portfolios. While we may occasionally overlap holdings with other Trillium strategies, we are very bonded in ESG and advocacy work as outlined above.

How would you describe your investment approach? E.g., GARP, value, GASP etc.

I would love to describe myself as a GASP (Growth at a “Scottish” Price) investor. We don’t like pigeonholes, but we are value investors in growing companies. We feel there is a false dichotomy between growth and value. Value to us doesn’t mean buying a low p/e company, it means believing in the intrinsic value of a company we are investing in.  So, it’s really undervalued as the market value looks really attractive vs. its intrinsic value. We look further out than many investors as we have a ‘buy forever’ mindset. Our modelling work is done 5 – 10 years out. To summarize, we are perceived as growth investors, but we are very sensitive to valuation.

What screens do you use? 

We don’t use quant screens at the investment level, but we do use ESG exclusionary screens, so we don’t invest in certain industries such as oil & gas, coal, tobacco, gambling, etc. We seek to avoid investing in companies whose activity has a negative societal impact. Trillium conducts materiality analysis of each sector using its proprietary ESG score. We avoid investing in the worst quartile of companies in each sector.

From a fundamental perspective, our growth hurdle looks for companies that will outgrow global GDP over the course of the investment cycle.  So, we tend to be biased against mature sectors such as western world utilities and secularly challenged sectors such as bricks & mortar retail and traditional media, for example. We focus on the resilience of companies we invest in. From a risk perspective, we are wary of highly indebted companies, e.g. – banks. We need to have confidence that if there is an economic shock, companies will come out the other side. We seek companies with a competitive advantage, so for example, we don’t favour commodity companies.

Six criteria for investment:

  1. Attractive end market. Secular growth long term but where companies can differentiate themselves.
  2. A long term competitive advantage. In 10 years’ time, will the company still have that competitive advantage? We spend a lot of time looking at this.
  3. High earnings quality. We are wary of companies that aggressively manage earnings to meet near term expectations and look closely at free cash flow generation.
  4. Quality of management team. In terms of tenure (current and previous companies) and capital allocation.
  5. Resilience. We don’t predict the outlook for the economy, geopolitics or events that could come out of left field such as Covid. Therefore, we like to know a company can withstand an economic or other shock and come out stronger than its competitors.
  6. Acting in all stakeholders’ best interests (customers, staff, shareholders, and the wider environment) as companies that don’t look after all stakeholders don’t prosper and we are an ESG fund.

Any favoured sectors?

Technology, healthcare and industrials.  (Similar focus to the fund I ran at Janus Henderson).

Will you invest in private or pre-revenue companies?

Unlikely but I wouldn’t rule it out altogether.

Explain some of your favoured holdings

Top ten holdings:

Netflix, Thermo Fisher Scientific, RELX, Alphabet, American Express, Microsoft, Adobe, United Health Group, PayPal, Icon PLC.

Thermo Fisher Scientific – an important enabler of access to medicine. It is a beneficiary of increased investment in healthcare processes and systems globally, underpinned by favourable demographics, rising living standards, scientific advances, and funding acceleration. Thermo Fisher provides instruments and consumables that support the discovery and manufacturing workflows of academics, biotechs and big pharma. Unlike big pharma tied to patent cliffs or biotechs dependent on one asymmetric outcome (a drug’s approval), Thermo Fisher offers diversified exposure to innovation in life sciences. Ongoing volume growth from biologic processing is particularly attractive.

American Express – Paperless payment is a long-term secular trend. The movement away from cash from a global perspective, could drive growth for many years. American Express is a beneficiary of that with its credit card while it differentiates itself from Visa and Mastercard as it is a financial company in its own right due to its consumer credit exposure. We like its orientation to the highest end consumers in the US; all retailers want high-end consumers. Essentially, this is a ‘premiumization’ story, similar to what we’ve seen successfully deployed in the luxury goods sector. AMEX can offer customers lots of perks and has a long-established network with retail companies.  We like the very strong brand, network effect and, it is a well-managed company.

RELX – is a market leader in enterprise search, with strong historical ties to the scientific and legal sectors. Like consumer search (Google) this remains an under-developed end-market. Whereas old RELX was used as a reference tool, new RELX is increasingly positioned as a decision-making tool. This isn’t properly appreciated. We don’t see anyone out there that has really solved for ‘enterprise search’ in the way that Google has for consumers. That’s largely due to the complexity of retrieving information for enterprises in structured and unstructured formats. Firms like Autonomy exemplify those who’ve tried and failed (now part of Micro Focus). As the mix shifts in favour of growth products (e.g., risk analytics), less encumbered by legacy (print) we see an improving outlook for growth.

Adobe – They have lots of characteristics which make it a great long-term investment in our view.  Clear dominance in well used software e.g., though its creative suite/Acrobat. Like so many software companies it has moved to SaaS so has a stable revenue model. It is easier for us to predict growth and for them to manage their business. It has a strong brand name and incumbency position. Once a company is that incumbent in a software app, there is the pain of adoption for a client if they get rid of Adobe and move elsewhere. Enormous stickiness given sunk training means the client is reluctant to move to another product/service. Due to its scale, Adobe is able to invest in R&D to progress its product beyond what the competition can offer.

Your aim is to outperform the MSCI ACWI on a rolling 5-year view – correct?


Average and largest position?

6.2% = largest and 3.1% = average.

Smallest market cap?

$500 million.

Average market cap in portfolio?

The median figure will be high as we have a number of mega caps in the portfolio so $120 billion.  (One extreme to the other).

Buy backs or dividends?

We don’t have a preference but review on a case-by-case basis. We don’t like to see increasing share count.  With mature companies, we want to see a declining share count, and dividend payments.  We also keep a close eye on FCF metrics as share issuance can distort this.

Do you vote your proxy for foreign shares?

We are extremely active in voting.  We don’t describe ourselves as activist investors (we are not trying to get seats on boards!) but the Trillium shareholder advocacy team puts forward proposals to get companies that are lagging in certain aspects of ESG to move in the right direction. Our firm is also active on say-on-pay, for example.

Do you have to meet management before you buy a stock?

No, but we’d like to.  The pandemic has certainly disrupted face to face interactions the past couple of years.

Preferred method of meeting management – conferences, one-on-one, groups?

It depends. We like conferences for new ideas but if we are invested, we prefer a one-on-one and appreciate group meetings too.

MiFID II – has it affected you? How do you work with sell-side analysts?

We have a small number of brokers and like the idea of a concentrated list of sell-side. We don’t use them for decision making per se but for their knowledge of companies. Sell-side research can be a shorthand way of getting public information and their industry expertise can help us gather knowledge of a company.

Any tips for companies about how they should communicate with Trillium?  

Come to Edinburgh. Direct communication is really useful. A willingness to respond on ESG issues is also greatly appreciated. And we really like it when companies facilitate meetings with management – that’s a big tick in the box.

Why should corporates target Trillium?

We are very long-term holders and want to partner with you, our interests are aligned long-term with senior management teams. Also, our investment can be viewed as the culmination of decades of leadership and selectivity both fundamentally and from a responsible/ethical point of view.  Our advocacy team is very ready, willing and able to interact to assist you in ESG areas of interest. And to top it off, we’re nice!

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