H1 Letter, EIP
Wei Meng and Pearline take us through the last 6 months
Dear Sponsors, Board of Advisors and Members,
The ESG Investing Program started in 2021 and this is the first letter for the ESG Investing Program. We believe that as a group of student investors, it is crucial for us to document our ESG investment journey for the benefits of self-reflection, as well as for our future successors to learn from our experiences.
The ESG Investing Program operates as 4 teams led by their respective Portfolio Manager (“PMs”). This structure allows the responsibility of the investment process to be borne by each individual portfolio managers across the 4 teams, as well as gives each analyst more responsibility in each stock that is researched and subsequently invested in.
Individual Team’s Performance and Reflection
Team Prism
Team Prism, led by Joseph Chong have not made any investments to date. They have spent considerable amount of time to develop their investment philosophy, which is to invest in companies with dominant moats, high ROIC, long term secular tailwinds and strong ESG factors. Given their views of upcoming layoffs being imminent, demand destruction as well as the FEDs hiking rates for at least the next 2 quarters, Prism intends to be patient in their investment allocation and continue to monitor future opportunities. Moving forward, companies in their watchlist include Disney, Coinbase and Meta Platform.
Team Allas
Team Allas, led by Grace Ang have made investments into Meta Platforms (fka Facebook) back in Jan 2022. To date, their portfolio is at US$ 9,549 (-4.5% YTD since inception). Their investment strategy is to invest in companies that have historically proven to have outperformed the market over time, and are more conservative when it comes to stock picks. Typically, the team would go for companies that they are more acquainted with, and these companies would have to have commitments made to pertinent ESG risks and opportunities within the context of the industry that the companies are operating in. The team is presently still monitoring its stake in Meta Platforms, and companies on their watchlist consists of SIA, CATL and Amazon.
Team Dream
Team Dream, led by Ang Jing Zhe have made investments into Daqo New Energy in Mar 2022, Adobe in May 2022 and GDS Holdings in Jun 2022. To date, their portfolio is at US$ 10,673 (6.7% YTD since inception). Their investment strategy is to invest in companies that have above average growth potential, are reasonably valued, and have a strong commitment to integrating ESG risks and opportunities into their business models. The team believes that there is a high correlation between companies that demonstrate a critical awareness of their impact on the society in which they operate in, and their long-term investment potential. Team Dream also abides by the mantra “Only invest in companies you understand”, emphasising companies that have simple business models, typically those with specialised and/or differentiated product/service offerings.
Team Viridi Terrae
Team Viridi Terrae, led by Jaclyn Ang have made an investment into Unity Software back in Feb 2022. To date, their portfolio is at US$ 8,242 (-17.6% YTD since inception). Team Viridi Terrae’s investment strategy is the seek ESG-centric investments with an aim of a medium to high return. The team observe macro trends which illustrate the needs of people, countries and the world. From there, the team choose the industries-of-the-future and study the fundamentals of the stocks.
The team’s is currently interested in the cleantech industry. With the worsening climate change and increasingly uncertain geopolitical situation, the team believe that the role of cleantech is more important than ever. Cleantech is the technology of the future which directly contributes to the Environmental component of ESG. One of the stocks on the watchlist is Longi Green Technology which is the world's largest manufacturer of solar panels.
The first-quarter earnings report for Unity was disappointing after Unity missed its targets due to a product error. However, from a long-term perspective, the team is still confident in Unity's fundamentals and potential. Unity is still a frontrunner in the real-time 3D technology and its potential goes beyond gaming into non-gaming fields such as architecture, automotive, film and the metaverse.
Overall Performance and Reflections
As a collective, the ESG Investing Program has an overall portfolio worth US$ 38,464 (-3.8% YTD since inception). MSCI World Index saw a -18.9% during the same period as well. Through the above investments, we would like to highlight a few learning points:
1. Hold less cash: Our current cash on hand is at 79.6%. Although there is a risk that the equities market will fall even further in the near future, we believe that holding too much cash impedes our investment journey. Furthermore, there will always be great investment opportunities despite the current market situation. Quoting Andrew Grove (Founder of Intel), “Bad companies are destroyed by crisis, Good companies survive them, Great companies are improved by them.”
2. Having proper due diligence is harder than it seems: We have all the tools necessary to perform proper due diligence at the palm of our hands, but given the scale and volume of potential due diligence to do, prioritising the right questions to ask becomes difficult. We become stunned by the possibilities and this factors in to why our cash holdings are proportionally high as well. Knowing what to do will come with experience, as well as from the guidance and mentorship of the advisors behind the ESG Investing Program.
With the current structure, all 4 teams share their experiences and knowledge of the companies that we invest in during monthly portfolio update sessions.
We would like to express our deepest gratitude to those who have made the ESG Investing Program possible. The ESG Investing Program will only continue to improve and we look forward to the next letter.
Best regards,
Neo Wei Meng (Chairperson) / Pearline Pang (Co-Chairperson)