Pursuant to the Article L533-22-1 of the French Monetary and Financial Code, Metori Capital Management (Metori) has an obligation to disclose its general approach regarding the integration of Environmental, Social and Governance (ESG) Criteria in its investment policy.
1. ABOUT METORI:
Metori is a pure-play systematic and quantitative asset manager. We combine ideas from academic research with empirical data analysis in order to implement strategies which have sound statistical and economical foundations. Our belief is that this scientific approach allows to uncover market complexities in order to generate performance for our clients.
Metori Capital Management was founded in 2016 by a group of seasoned professionals from Lyxor Asset Management (Société Générale Group). The company brings together a team of experts in capital markets, portfolio management and IT infrastructure.
2. CORPORATE SOCIAL RESPONSIBILITY:
The question of responsible investment was raised early in the foundation of Metori Capital Management. Acting in a socially responsible and ethical manner has been made one of Metori’s core values since the launch of the company. We are strong supporters of responsible capitalism and believe that we can have an impact both through how we act as a firm and through the investments we make for our clients. This section documents our efforts on both of these fronts.
While responsible investment cannot be reduced to a unique consensual definition, we believe its primary objectives are to:
– Invest with a certain philosophy and in keeping with certain values
– Invest while considering the risks and opportunities identified in the non-financial analysis of issuers
– Invest to make a positive impact on social, environmental and governance issues
– Support the development of sustainable financial markets and the long-term market stability as a whole
How these objectives can be met varies significantly depending on the investment style and the products traded. Existing ESG frameworks largely focus on traditional assets (equities, credit, infrastructure, private equity…). Some best practices have emerged and been largely adopted by traditional players (e.g. ESG screening, exclusions, active ownership…). On the contrary, integration of ESG factors in futures investing has only recently emerged and is still being largely debated.
3. CORPORATE ENGAGEMENTS:
The following internal guiding principles have been established to support our commitment to conduct business in a socially responsible and ethical manner:
1. Metori will be transparent with respect to its progress on ESG research and implementation solutions
2. Metori will incorporate ESG issues into investment analysis and decision-making processes to the extent it is possible and in line with our fiduciary obligations
3. Metori will perform a continuous watch on ESG best practices and embrace research and education on the topic
4. Metori will support and promote responsible investment within the investment industry (clients, peers, industry forums …)
5. Metori will ensure it allocates sufficient time and resources to meet the above objectives and to aid our clients in their understanding of ESG-based investing
Metori Capital Management became a signatory to the UNPRI in 2018. The UNPRI initiative is an international network of over 1,750 signatories, from more than 50 countries, representing $70 trillion in assets under management as of August 2017. UNPRI signatories work together to implement six core principles of responsible investment. For more information, please visit: https://www.unpri.org/.
In line with regulatory requirements and Metori’s internal code of conduct, we have implemented strict internal procedures on how to conduct our business in terms of equal treatment of investors, alignment of interests or handling conflicts.
Finally, Metori is mindful of its environmental impact in every possible way, ranging from travel policies to the choice of providers and business partners.
4. RESPONSIBLE INVESTMENT POLICY:
Metori’s investment approach is data driven, model-based and systematic. We analyse large amounts of data on a daily basis to identify the direction in which market forces drive asset prices and measure underlying uncertainties. The investment program seeks to achieve capital appreciation over the medium to long term by implementing a trend-following strategy across multiple asset classes. We typically try to capture 6-month trends, horizon where noise starts to disappear, and prices to evolve in line with fundamentals.
Our investment universe is exclusively composed of futures on stock indices (no single-stock futures), interest rates, currencies and commodities traded on the largest regulated global futures exchange markets. It does not comprise any single stocks nor corporate bonds. A traditional ESG investment approach based on screening, exclusions lists or active ownership (voting rights) is therefore not relevant.
The use of derivatives is a sensitive issue as it raises the question of the tangible impact on the economy. Different views exist amongst investment managers and clients. Some players argue that ESG criteria cannot be applied to derivatives, others integrate some criteria in the choice of underlying assets.
In order to support the development of sustainable financial markets and to best adapt ESG inclusion to our investment style, Metori’s view is that our investments should at a minimum have no material impact on market prices:
1. We choose to trade on markets and instruments which provide the largest liquidity. Practically speaking, we impose hard liquidity limits on all futures from our investment universe. We have hard limits on the below two metrics which are monitored at instrument level on a daily basis:
– Ratio between positions held and the open interest
– Ratio between positions held and the average traded daily volume
2. Execution is largely performed through algorithms provided by our brokers. These algorithms leverage a variety of data such as liquidity or traded volume, thus helping us to avoid affecting market prices with our trades.
It is also worth mentioning that we strictly abide by limits imposed by regulators such as the U.S. Commodity Futures Trading Commission (“CFTC”) to prevent excessive speculation and sudden fluctuations or unwarranted changes in prices.
Other options have been and are still being considered. One example is the inclusion of some newly launched ESG futures in our universe. At this stage, the liquidity observed on these instruments has not been deemed sufficient to meet our fiduciary responsibility. The evolution of these instruments is being closely monitored.
Our responsible investment policy is reviewed on an ad-hoc basis (e.g. new product launch) and at least annually by Metori’s Executive Committee to ensure we meet the highest industry standards. Raising the general awareness on ESG investing and shaping the future of ESG investing are two goals that hold us dear.