Impact investing specialist Circa5000's co-founder Tom McGillycuddy has outlined ambitions to launch ETFs in mainland Europe and beyond and to address asset classes other than equities before its first products have even debuted in the UK.
Last week, ETF Stream revealed the firm's plans to list its first five products on the London Stock Exchange in the first week of June after its Irish fund umbrella received Financial Conduct Authority (FCA) recognition.
The ETFs are:
CIRCA5000 Clean Water & Waste UCITS ETF (C5KW)
CIRCA5000 Green Energy & Technology UCITS ETF (C5KG)
CIRCA5000 Green Energy & Technology UCITS ETF (C5KG)
CIRCA5000 Health & Wellbeing UCITS ETF (C5KH)
CIRCA5000 Sustainable Food & Biodiversity UCITS ETF (C5KF)
McGillycuddy (pictured) told ETF Stream the five ETFs will initially be available to UK investors via the firm’s platform as well as wealth managers, IFAs, banks, brokerage platforms and potentially even third-party model portfolios.
He said the plan will then be a similar roll-out in the EU “minus the retail footprint”, with his team already receiving “a number of reverse enquiries” about the ETFs from investors in Germany, France, Italy and Belgium.
“We will look to begin listing in other geographies in the next three to six months because there is demand,” McGillycuddy continued. “The long-term plan is full European coverage and then beyond. There is not a geographic-specific demand for what we do.
“We have already had some conversations about different regions outside of Europe but that will probably be a three-to-five-year horizon.”
He said Circa5000 has built its upcoming products to eventually appeal to institutional players such as pension funds, with larger investors already asking if the firm could apply its impact assessment framework to other asset classes.
“The aspiration has always been to build a suite of impact products using the methodology across asset classes, to broaden the appeal across retail and institutional,” he added. “Fixed income is a natural next step as well as a mixture of our five existing themes as a ‘best of’ multi-theme product.”
Speaking on how his firm has readied itself for an emphatic entry, McGillycuddy said Circa5000 has a ready-made distribution through its retail platform, where its ETFs can be incorporated into existing client portfolios.
The firm also chose to build its own ICAV rather than launching via a white-label ETF issuer, “which is not an easy thing to do” but ensures the it has full control and collects keeps all profits made by its products.
Impact built in-house
Unlike many ETF issuers, Circa5000 built the indices underlying its products in partnership with BITA and Impak Analytics.
Each benchmark attempts to identify companies creating a positive impact for their respective theme as well as well-governed companies doing the most to mitigate their negative externalities.
McGillycuddy said: “Our methodology relies on a framework called the Impact Management Project’s five dimensions of assessing impact, which is an industry-leading methodology we blend in with our three own areas of research as well as fundamental and quantitative research.
“We produce free-to-access 30-page reports on each company in our ETFs, where we transparently explain our investment decisions and how each holding creates strong net positive impact.”
He added the ETFs are not actively managed but have a controversy screen to remove companies whose impact has been materially changed. New companies that come to market deemed impactful can also be added to the ETFs.
“We do not rely on any existing data sets. It is all created from scratch,” McGillycuddy stressed. “The products are essentially active creation, passive implementation and we are producing the level of per company reporting that probably most active funds do not even do.”
