CPR Asset Management enriches its thematic range with a new strategy, CPR Invest – European Strategic Autonomy, an equity fund aiming to support the strengthening of Europe’s autonomy and resilience in key strategic domains. Interview with Damien Mariette, the strategy’s lead portfolio manager.

WHAT ARE THE MAIN MOTIVATIONS BEHIND THE GENESIS OF THE STRATEGY?

Recent events e.g. the global pandemic, the energy crisis partially caused by geopolitical tensions etc., have forced Europe to confront its strategic weaknesses by highlighting its external dependencies in critical sectors. Indeed, during the Covid-19 crisis, key European supply chains experienced significant disruptions due to restrictions on imported intermediate inputs spanning from essential pharmaceutical principles to electronic microchips. Again, because of its high external dependency on energy, Europe has been the hardest hit by the energy crisis with gas and electricity prices reaching record highs. These examples illustrate the complexity of the world we live in, which is changing at an unprecedented pace. In such context, Europe has to act firmly and swiftly to secure its strategic resilience. Numerous spending plans have already been put in place at a European level to support the building of a more autonomous Europe while in parallel generating new market opportunities. We are convinced that, in order for this ambitious goal to be achievable, private capital too needs to be mobilised. As an asset manager, we aim to contribute to this goal, by proposing a new thematic strategy that channels private investments into Europe’s strategic areas.

HOW HAS THE STRATEGY BEEN STRUCTURED TO ADDRESS THIS AMBITIOUS CHALLENGE?

We have took up this challenge by adopting a structured approach to the theme. We have first defined the domains in which Europe must regain and strengthen its autonomy. More concretely, we have defined four domains, which constitute also the main pillars of the strategy’s investment universe. The first pillar refers to the industry domain. Europe needs to be reindustrialised and this is even more relevant in three strategic industrial areas.
We need to:
1/ secure our manufacturing supply chains and invest in infrastructures, logistics, transport, automation and robotics;
2/ ensure energy independence by protecting the proper functioning of the energy market and in the meantime develop new, renewable and reliable energies;
3/ enhance digital autonomy to effectively take up the challenges of tomorrow by investing in secure, resilient and durable digital infrastructures.

The second pillar refers to food. It englobes the entire food value chain and responds to the necessity of guaranteeing food quality, availability and accessibility for everyone. The third pillar concerns healthcare services aiming to provide available, accessible and quality care for everyone. This pillar includes medicines and medical devices, the developing of preventive and diagnosis tools as well as innovations enabling the acceleration of healthcare’s digital transformation. Lastly, we have the defence pillar. Strengthening the European autonomy means also ensuring protection through larger, more sustained military budgets enabling to reinforce Europe’s defensive capabilities.

WHAT MARKS OUT YOUR INVESTMENT PHILOSOPHY? ANY PARTICULARITIES WORTH MENTIONING?

Selectivity and granularity are the main building blocks of our investment philosophy. After defining the main pillars of our investment universe, we proceed with the application of several exclusion filters, which are both thematic and ESG-related. First, among each pillar we review all sectors and companies’ main activities to keep only those deemed strategic for the thematic (e.g. soft drink or dental implants ones are excluded). We also use a capital ownership filter to ensure that a company’s board is aligned with the European interests. To this end, we exclude companies owned by more than one-third by a single non-European investor. The fund integrates also an ESG framework. CPR AM relies on the ESG resources made available by Amundi Group. Alongside the Group’s norm-based and sectoral exclusions, we also exclude companies subject to high ESG controversies and with poor ESG practices both at a global level and on specific criteria such as ‘Climate’, ‘Biodiversity, pollution and waste’ and ‘Ethics’.

TO CONCLUDE, COULD YOU SPEND A FEW WORDS ON THE PORTFOLIO AND CITE SOME STOCK EXAMPLES?

At launch, the eligible investment universe includes around 310 stocks with a well-diversified profile: cyclical, defensive, value and growth. The final portfolio consists of around 55 stocks and seeks to reconcile the search of performance with the improvement of its overall ESG rating compared to its investment universe. As per the examples of stock present in our eligible investment universe, we can mention ASML Holding NV, a global leader in the production of photolithographic machines for the semiconductor industry, which has integrated our manufacturing dimension. Another example, in the health dimension, we look at Sanofi, a key player in health in Europe that develops pharmaceutical products and vaccines.

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