Continued growth in more favourable market conditions
Triodos’ sustainable equities portfolios continued to increase their impact during the year and combined this with overall financial returns, which increased by 26%.
Triodos Bank Private Banking 2013
Total = EUR 915 million
Triodos sustainable bond portfolios however had a weak year, with negligible returns. This effect was also visible in the defensive portfolios held by Triodos Private Banking customers. Triodos Private Banking tries to provide other ways for their clients to invest that will deliver strong social and environmental returns and matching financial returns.
Overall Triodos Private Banking grew its entrusted funds by EUR 95 million to EUR 915 million, a growth of 12%, compared to EUR 166 million (25%) in 2012. EUR 407 million of these funds are managed by Triodos Private Banking but accounted for on the balance sheet of the Dutch branch.
The composition of these entrusted funds again remained broadly the same, with the majority allocated to asset management through Triodos MeesPierson Sustainable Asset Management. In Belgium, entrusted funds grew substantially by 61% to EUR 156 million, including money entrusted to Triodos’ partner Puilaetco. In The Netherlands, growth again came predominantly from private individuals, with foundations and religious organisations more reluctant to commit capital.
Private banking customers’ risk appetite grew in 2013, reflecting the freedom they enjoy to choose their preferred risk profile and sustainable impact; whereas charities, churches and foundations are much more constrained with portfolios biased towards low yielding bonds. This is a problem for charities and religious institutions that are dependent on bonds to provide stable income that perform less well. Triodos Bank provides an alternative for these groups allowing them to both align their mission with their investments, and offering the prospect of matching financial returns.
New business models
Triodos Bank Private Banking implemented an alternative pricing model for all its investment services in 2013. In it, investors only pay for specific services they use, such as executing transactions only, advice or discretionary asset management. The rationale behind this new model is driven, in part, by regulatory pressure to make sure that investors reward their asset managers in a transparent way.
In principle, Triodos Private Banking fully supports this model. But it is also conscious that this ‘fair pricing’ model should not exclude smaller investors from advice or a meaningful dialogue about how investments can support positive changes in society. As a result Triodos Private Banking introduced dedicated investment advice for investors with holdings of between EUR 300,000 and EUR 500,000 in the last quarter of 2013. This contrasted with market trends and early signs are that it has been well received by customers.
2013 was a slow year for Triodos’ bond portfolios, with a 0.3% return. Defensive portfolios with approximately 25% equities yielded 5.5%, while neutral portfolios with approximately 50% showed 11.3% returns. Triodos’ sustainable equity portfolios again outperformed the overall MSCI index. Since 2006, when Triodos MeesPierson started its operations, Triodos Private Banking has outperformed this index by 25%.
Performance Triodos Equity portfolio versus MSCI
Start = 100 at inception Private Banking in September 2005
Triodos Private Banking’s third investment class of alternatives – or mission related investments – which are only available in The Netherlands, returned a loss of 8.6% in 2013. This disappointing result was predominantly due to a marked decline in the valuation of the Triodos Sustainable Real Estate fund. During the year, this fund changed from an open end fund, traded outside an exchange, to a closed end fund traded on the stock exchange. The flotation resulted in a marked decrease of the share price against its intrinsic value. In addition, Triodos Fair Share Fund, which finances microcredit institutions and is part of our alternative portfolio again had a very successful year. Its investments grew by almost EUR 20 million and the fund delivered returns of 6.8%.