The chief executive officer of Impax Asset Management Group says the sudden exit of one of its biggest clients represents a setback, as the firm embarks on a number of strategy adjustments to reverse a losing streak.
Impax is still recovering from a decision by St. James’s Place to pull a £5.2 billion ($6.3 billion) mandate, which the wealth manager said was needed to “improve diversification.” The loss of the portfolio, which St. James’s awarded to Schroders, has resulted in an 8% drop in Impax’s total assets under management, bringing them to around $40 billion.
News of St. James’s exit, announced in mid-December, sliced almost 25% off Impax’s market value in a single trading session. Since the end of 2021, the asset manager’s share price has plunged more than 80%.
“We always knew that it was a risk that these mandates might disappear,” Ian Simm, CEO of the London-based money manager known for its focus on the transition to a more sustainable economy, said in an interview. “It was a blow, but it was always possible given our risk analysis.”
Simm said Impax’s focus on actively managed strategies has created headwinds of late. It’s a trend that was on display in a recent Morningstar analysis, as the researcher estimates that in the U.S. alone, actively managed funds have slumped from almost 90% of the total market for sustainable assets to just 60% in the past decade.
“We’re just seeing that some asset owners and our clients are in a bit of quandary as to what to do with actively managed funds,” Simm said.
The asset manager has long stood out as a giant in low-carbon investing, and its fate has become emblematic of the hurdles faced by the broader market for sustainability. After some bumper years during the pandemic, when interest rates and demand for energy were at crisis lows, the strategy has struggled to keep up. Higher interest rates, an energy crisis and political attacks in the U.S. have proved a toxic cocktail for investors targeting ESG (environmental, social and governance) themes, with actively managed strategies suffering the brunt of the pullback.
“Impax has been hurt quite badly” by the loss of St. James’s, said Ronald van Genderen, an analyst at Morningstar. The asset manager relies to a large extent on such relationships to distribute its funds, and it “makes you quite vulnerable if your partner says it’s going to terminate,” he said. “You’re hit by massive outflows.”
Simm downplayed the possibility of losing more mandates. But with roughly 90 clients, Impax will inevitably see some churn, he said. Employees are already feeling the fallout, as Impax notes its bonus pool in the fiscal year 2024 was about 11% lower than in 2023.
The Impax Global Environmental Markets Fund, which has almost $2.4 billion under management, is up roughly 4% so far this year. But overall since the beginning of 2022, when interest rates started to rise, it’s stagnated, according to data compiled by Bloomberg that takes reinvested dividends into account. That’s despite being overweight the U.S., where the S&P 500 index has gained more than 30% in the same period.
Shares in Impax are down about 16% this year, compared with a roughly 5% gain in the FTSE 100 Index.
The asset manager has been adding exposure to credit markets and Big Tech, in an effort to improve returns. Simm said Impax has “been working hard and successfully to diversify the business that was underway with the fixed-income growth.”
The firm says its most valuable relationship continues to be with BNP Paribas Asset Management, which is also its largest shareholder and biggest European distribution partner. Impax estimates that outflows from the French distribution channel and U.S. mutual funds have slowed.
Simm said he’s optimistic that the incoming administration of President Donald Trump may bode well for Impax. That’s despite Trump’s decision to roll back Biden-era climate policies, drag the U.S. out of the Paris climate accord and double down on support for fossil fuels.
But Simm said he can imagine a scenario in which low-carbon assets get a boost, “if Trump’s policies end up being broadly positive for the U.S. economy and U.S. industrials, if businesses continue to have an incentive for materials and energy efficiency, and if there is a rational response to wildfires, storms and floods that we’ve seen in the US over the last 12 months.”
Other asset managers have drawn similar conclusions, based on an assumption that Trump’s policies around tariffs and energy security might end up supporting U.S. clean-energy sectors such as solar.
