“We managed to weather the storm of the lockdown months thanks to the hard work and commitment of all our teams.” “And we did it well,” explains Álvaro Anguita, CEO of MAPFRE AM — at the close of 2020, MAPFRE became the first Spanish manager to receive the ‘Label ISR,’ the most prestigious sustainable investment label granted by the French Ministry of Finance.
Turning to sustainability, “it’s in our DNA,” he tells us, “because corporate social responsibility has already featured in our founding statutes for more than 50 years.” MAPFRE is applying Environmental, Social and Corporate Governance (ESG) criteria to its entire range of funds, and with very good results; “MAPFRE AM Good Governance, for example, closed the year at +29 percent.” So, “a good sign that socially responsible investment and profitability are compatible is that in 2020 we have seen in a very practical way that socially responsible investment [SRI] has performed better than traditional benchmarks.”
“In recent months, both interest rates and inflation forecasts have already rallied”
MAPFRE AM’s strategy is also defined by its commitment to impact funds, which led it to collaborate with the specialist manager Global Social Impact (GSI), launched by Francisco García Paramés in July 2020: “This project was perfectly aligned with what we advocate, which is impact investment. So everything fell into place perfectly.”
Impact investment is “investment that seeks to have a direct benefit for society through different types of projects. And we’re not talking about philanthropy because it’s not about making donations.”
Concerned about the global economic situation, and in Spain in particular, Álvaro Anguita believes it is essential that the tourism sector recovers as soon as possible, “which means accelerating the vaccination campaign.” “Spain will be one of the fastest growing economies this year, but this is largely because it has been one of the hardest hit by the COVID crisis.
“European funds will contribute two points to Spanish growth each year between 2021 and 2023, although it will take time to return to pre-crisis levels”
You ended 2020 and started 2021 with good news because MAPFRE became the first Spanish manager to be awarded the ‘Label ISR,’ the most prestigious sustainable investment label.
That’s right. For us, it’s recognition of the work we’ve been doing for many years and proof that our strategy is on the right track. We were subjected to very complicated due diligence by the consultancy firm AFNOR, but we managed to resolve it thanks to the effort of the whole team, making us the only Spanish manager to achieve it. As you know, this label, which is awarded by the French Ministry of Finance, is hugely prestigious in Europe and, in some way, it validates the methodology we use to apply the ESG criteria to our funds — in particular, MAPFRE AM Capital Responsable, which covers all three ESG aspects, and MAPFRE AM Inclusión Responsable, whose portfolios cover companies committed to including people with disabilities in the workplace. In fact, the latter has been set as an example of best practice by the United Nations.
MAPFRE AM did quite well in 2020. How did you weather the COVID storm?
The lockdown months were a storm that we weathered thanks to the hard work and commitment of all our teams. We were prepared for remote working from the get-go and were even able to launch a mutual fund with great success. As a result, 2020 was a great year for MAPFRE AM and its funds in terms of profitability, especially equity funds both in Europe and across the globe.
Some of our proposals have placed highly in the rankings and I would especially highlight the results we’ve had with our ESG funds, which have ended the year in positive territory. MAPFRE AM Good Governance, for example, closed the year at +29 percent.
2021 is likely to be a year of strong recovery for the global economy
In general, the profitability of our range of funds, both in Spain (through the FondMAPFRE funds) and in Luxembourg, have outperformed not only the benchmarks, but also the average of our competitors and the targets set internally.
I believe that our prudence, which is our trademark as an insurance group, together with a good selection of securities and the ability to properly identify the buying opportunities offered by the market have been the main factors in this positive result.
You launched a guaranteed fund with a yield of 3 percent, well above the market, in collaboration with the Community of Madrid. We’re talking about a social impact bond, in this case pertaining to health, is that right?
Exactly. The MAPFRE AM Compromiso Sanitario fund has been a great example of the public and private sectors collaborating to address a serious problem such as the COVID-19 health crisis. Our main shareholder, Fundación MAPFRE, has been involved with multiple grants (more than 200 million euros) and we, at MAPFRE AM, also wanted to collaborate with a social impact fund. We looked at a few different alternatives and contacted the Community of Madrid to purchase a social bond for healthcare expenditure caused by the pandemic. From the beginning, we thought it would be really positive to ensure that our clients also had the option to take part in this exciting project. The CAM bond served as collateral for a guaranteed fund, and together with a significant financial contribution from the manager itself, we were able to offer a very attractive yield to investors. Marketing during lockdown was a success and we are particularly proud of this product launch because we believe that, not only does it have a good financial yield, but we have also delivered a good social yield. In addition, the Community of Madrid sent us the impact report with the breakdown of the items to which the money was allocated, mainly healthcare workers’ expenses, hospital care costs and hospital pharmaceutical expenses.
Proof that things have gone well for your manager is that sustainable funds have beaten the market in 2020, with better returns than the market and other comparable funds. So, socially responsible investment is compatible with profitability
Not only is it compatible, but companies that are more financially sustainable and that we expect better behavior from are the ones that devote the most resources to environmental, social or good governance issues. In 2020, we saw in a really practical way that SRI performed better than traditional benchmarks, and was less volatile. And if we add the resulting social profitability to the mix, we find a duality that both institutional investors and private individuals are demanding.
MAPFRE AM Good Governance had a performance of 29.21 percent in 2020 and 5.76 percent so far in 2021. Where does this fund invest?
We launched this fund at the end of 2017 and are very happy with the results we’ve had during this period. The past year was certainly spectacular, surpassing the benchmark by more than 20 points. It’s a global equity fund that invests in companies with good corporate governance. Today, US companies have a great deal of weight as good corporate governance practices are more widespread on the other side of the Atlantic. The managers have a very clear investment policy for the orderly selection of companies that meet good governance criteria. They don’t invest in companies where accounting is opaque, which may be at risk of manipulation, or in companies for which qualified audit opinions are issued. They also avoid shareholder crossover. Conversely, we favor companies that have a stable shareholder structure, those with a reference shareholder—a controlling shareholder—that looks at the long-term and creates value.
We favor companies that have a stable shareholder structure.
I am told that the MAPFRE AM Inclusion Responsable Fund is a special vehicle. What are its investment criteria?
It is a normal and accessible fund for both institutional and retail clients. In any case, it’s special because we have been pioneers in launching a fund of this kind that really puts the focus on the “S” of “ESG” — that is, on social aspects. The fund’s portfolio includes those companies that are committed to including people with disabilities in the workplace. But it’s not only special because of the theme, but also because of the methodology used. It is based on 7 main themes with 40 variables. The themes include commitment (that is, the disability policies put in place by companies), integration (inclusion), specific initiatives, and accessibility or architectural barriers. As a result of the analysis, which includes continued contact with the companies, four levels of compliance are identified: emerging, promising, committed or leading. This fund demonstrates how we have been able to design and build a completely new investment methodology and product from scratch, together with our French partners, La Financière Responsible.
You have partnered with Paramés to launch the Global Social Impact Fund. What kind of fund is it and what is MAPFRE AM’s role?
Our relationship with Maria Ángeles León, Co-founder and President of GSI, is fantastic. However, this project was also perfectly aligned with what we advocate, which is impact investment. So everything fell into place perfectly. That’s why we decided to participate in the Global Social Impact Fund, a fund that provides financing to companies with high social impact on both frontier and emerging markets. In addition to providing seed capital together with Santa Comba, we are advisors in the vehicle’s investments. The companies selected must be economically viable and have a positive social impact on the community in which they are established. Impact investment is not incompatible with profitability. In fact, the fund has an annual profitability objective of between 5 and 8 percent, with annual liquidity from 2024. It focuses on three main sectors—agriculture, energy and financial inclusion—and most of the investment takes place directly in short-term loans and debt structures.
This is not MAPFRE’s first venture into impact investment, is it?
No. As I said earlier, we have years of experience in this field and our aim is to continue to increase impact funds. It is important to note that a key part of these investments is being able to get an impact report to quantify the fund’s actual contribution. We’ve been working with the University of Siena for years to measure the impact of our investment decisions, but we are also in constant contact with the academic world for different projects through our Sustainable Finance Observatory, which we launched just a few months ago.
What do we mean when we talk about this type of investment?
Impact investment seeks to have a direct social benefit on social or environmental issues through different types of projects. It is very different from philanthropy because it is not about making donations. Impact investment aims for a financial return on the condition that there is a positive, quantifiable contribution to society. It is a reality that our investors are going to demand it more and more. And this is not an empty gesture. At MAPFRE we have a very wide network of offices with direct and ongoing contact with our clients and they tell us first hand.
We’ve been working with the University of Siena for years to measure the impact of our investment decisions.
MAPFRE is a pioneer in corporate social responsibility, or CSR, which can be understood as a stepping stone toward socially responsible investment. So, would you say MAPFRE AM had already done a good deal of the work?
Indeed. CSR goes all the way back to the group’s origins, when it first appeared in the founding statutes more than 50 years ago. We, as a manager, have an obligation to apply the values of the Group and the main shareholder, Fundación MAPFRE. We have that mandate to apply the ESG criteria to our entire investment process and across all types of portfolios, mutual funds, pension funds or investments that correspond to the balance sheet of the companies in the Group. It’s a process that we have already implemented, affecting much more than just our range of ESG funds, as I said. A very important milestone in this process was when we acquired a stake in La Financière Responsable in 2017. LFR is a French boutique with over ten years’ experience in socially responsible investment that has developed its own methodology, which has been recognized by the French Ministry of Finance. With this acquisition we bought the time it would have cost us to start developing our own methodology from scratch. It is clear that SRI is much more mature in countries such as France and we believe, in this regard, that we found one of the best. LFR is a French fund manager that has built its reputation on the basis of the good results yielded by applying its own methodology. We are very happy with the relationship we’ve had over the last few years and hope that it will continue.
You’ve just launched in the United Kingdom. What has led you to embark on this post-Brexit adventure?
I would say that launching there is a little ambitious. We took the opportunity to house some of our funds in the UK before Brexit to start exploring the most difficult and competitive European market. We aim to focus on large institutional investors in the UK market with our range of sustainable funds (MAPFRE AM Capital Responsable, MAPFRE AM Inclusion Responsable and MAPFRE AM Good Governance) and with MAPFRE US Forgotten Value, a fund we co-manage with Boyar Value Group, a US boutique that we have a partnership agreement with.
Regulatory changes to SICAVs are currently being made in Spain, alongside the recent announcement that more than 1 billion euros are now managed through these vehicles
The 1 billion figure corresponds to the SICAV that we have in Luxembourg, not Spain, so those regulatory changes do not affect us. We opened the scheme in 2017 and currently have 11 funds with different investment strategies. The intention is to continue to give the manager an increasingly international profile and thus reach institutional investors and private banking networks.
Do you still view equities ‘constructively’ in 2021 and favor the EU stock market over the US one?
2021 is likely to be a year of strong recovery for the global economy. The trigger is obviously the foreseeable arrival of herd immunity with the help of the current mass vaccination campaigns. It is a favorable context for financial markets, although there are new risks to be faced. While the risk of insolvency is decreasing, valuation risk associated with a possible hike in rates is increasing. In fact, both interest rates and inflation forecasts have rebounded in recent months.
At the global level, there are two very strong poles of growth that stand out from other economies. One of them is the United States, where growth could reach 6 percent, and the other is China, which has recovered and even exceeded pre-pandemic levels of production. In Europe, the lack of flexibility and dynamism and poor technological leadership may limit growth in the coming years. Structurally, we continue to be committed to the United States, although Europe may exceed expectations if it makes the necessary structural reforms soon.
There are two very strong poles of growth that stand out from other economies: the United States and China
And do you still think that the IBEX 35 will not be among the best European indices due to its banks? For the moment, the banks are doing quite well.
The economic recovery should ease the deflationary pressures that have done so much damage to the finance sector, which is well over-weighted on our stock market. If the recovery is strong, this relief could be greater than expected, which would be very positive. With the vaccine, our tourism sector will resume contributing to growth, although its weight is small. We need more technology, industry and the overall generation of high-quality added value to compete in terms of profitability.
Where are your savings invested? If you’re happy to tell me, of course.
The advantage of working in a group such as MAPFRE is that the wide variety of products we offer, with very different assets and risk profiles, means that you don’t have to go far to have a well-diversified portfolio. That said, there are always gaps to be filled. From being able to choose anything from an insurance format (unit-linked, savings insurance, etc.) to a pension fund, from an investment in alternative assets to an investment in a UCITS fund with different investment strategies, it’s a great advantage. And in order to be able to plug these gaps, our aim is to continue to reach agreements with other international managers that provide what we’re missing and to be able to continue to enhance our product range.
The vaccine, Brexit, USA and European funds. Can you rank these issues in order of importance to economic and market developments?
All the factors you mentioned are of great importance and it is difficult to give a specific order. It is clear, however, that without a vaccine we would return to lockdown and a global shutdown of the economy. As such, today, the vaccine is essential to be able to leave the economic slowdown of 2020 behind. In fact, we’re already seeing that the effects of vaccination are what we hoped they would be. In Spain, in particular, it is essential to recover tourist activity as soon as possible, so we should accelerate the vaccination campaign.
With regard to European funds, I believe that they are also essential if Europe wants to keep up with countries like the USA, where fiscal policy is proving to be highly expansionary.
Do you think that Spain will be at the forefront of growth as Brussels has forecasted?
Spain will be one of the fastest growing economies this year, but also because it has been one of the hardest hit by the COVID crisis over the past year. The reality is that it will take us some time to return to pre-crisis GDP levels. In this regard, I would like to point out the forecasts issued by MAPFRE Economics. In the baseline scenario, they expect Spanish GDP to grow by 6.1 percent this year and 6.3 percent in 2022, although 2019 levels of activity will not be reached until at least the last quarter of next year. To this end, and in reference to the previous question, the fiscal aid package approved in Brussels will be key, since the use of EU funds will contribute 2 percentage points to growth each year between 2021 and 2023.
MAPFRE Economics estimates that Spanish GDP will grow by 6.1 percent this year and 6.3 percent in 2022.
What is the first thing Álvaro Anguita does when he gets home from work?
During the week when I get home the first thing I do is find out, besides my wife, which of my three children are home and ask them all about their day and try to have dinner together. If I get home early and I have time, I go and hit a few balls at the driving range to attempt the seemingly impossible task of improving my golf game.