A growing trend for asset allocators to think thematically instead of geographically is increasing the competitiveness of M Sport Solutions SRI, a global thematic equity fund that plays to the strength of the sport and wellness sectors
After two years of a global pandemic, people have an increased willingness to have an active and healthy lifestyle. This is not a fashion; it’s a huge social trend – Nicolas Kieffer, Montpensier Finance
When M Sport Solutions SRI launched two years ago, thematic investment was typically a satellite investment.
‘Now, it could be a core investment,’ says Montpensier Finance’s Nicolas Kieffer, who co-manages the sport and wellness fund alongside Bassel Choughari. ‘You can have a very diversified portfolio with only thematic funds.’
Demand for investments that seek to address big global issues is another driving force for the fund. The health and wellbeing of the global population is a major societal challenge for the coming years; an investment in this theme supports three UN Sustainable Development Goals (SDGs).
The fund has a significant contribution to the third SDG (good health and wellbeing) and also a meaningful contribution to SDG 11 (sustainable cities and communities) and SDG 12 (responsible production and consumption). Its sustainable investment objective defines it as an Article 9 fund under EU Sustainable Finance Disclosure Regulation and it has been awarded the French SRI label.
The sport and wellness economy is worth an estimated €4.5tn (£3.8tn) and growing at a rate of around 7% – almost twice the rate of global GDP growth. This dynamic should continue thanks to growth relays in all market segments.
The Covid-19 pandemic has acted as a powerful catalyst. This is reflected in an increase in the practice of individual sports like running, cycling and yoga, growing attention to diet, the emergence of e-sports and new digital training and competition formats, as well as an acceleration in the trend for casualisation and athleisure thanks to remote working.
At the same time, the post-pandemic return of global sporting events – the summer Olympics in Tokyo last year, the Winter Olympics in Beijing in February, and the Fifa World Cup in Qatar this winter – is reigniting public interest.
‘After two years of a global pandemic, people have an increased willingness to have an active and healthy lifestyle. This is not a fashion; it’s a huge social trend,’ says Kieffer, himself an accomplished ironman triathlete.
‘Governments all over the world are investing massively in infrastructure to push populations to be more active, adopt better nutrition habits and have healthier lifestyles. We have public attention and government support – this is the main push for the theme.’
Take China, for example. Fresh from its athletes’ Summer Olympic success, its national fitness plan set ambitious goals. It wants the proportion of residents exercising regularly to reach 38.5% and the sports industry to be worth ¥5tn (£600bn) – 4.5% of China’s 2021 GDP – by 2025. As part of that, it aims to establish or expand more than 2,000 sports parks, public fitness centres and stadiums.
Montpensier’s approach to capturing such growth is disciplined and robust. Its first filter excludes European companies worth less than €400m and international companies less than €1bn, and reduces the global sport and wellness ecosystem of more than 7,000 companies to about 900.
Its second filter ensures companies are meaningfully exposed to one of three major structural vectors: sporting goods and equipment, healthy and active lifestyle, and sport business (such as sports rights and the e-sports value chain). This reduces the investable universe to about 600 companies. ESG analysis and a four-step exclusion process decrease that further to 450.
The stock selection process favours companies with quality management teams with a long-term vision and whose interests are aligned to shareholders. Crucially, validation of their investment thesis is obtained from GLG, the world’s largest expert network.
That results in a portfolio of about 40 companies that are among the sport and wellness leaders of today and tomorrow. They boast innovative products and solutions, strong competitive advantages, good pricing power and high barriers to entry.
To give two examples, Sweden’s Mips, a world leader in brain-protection technologies for the helmet industry, was added to the portfolio in early 2021, and Holland’s Basic-Fit, a European leader in gyms, has been held since the fund’s launch in February 2020.
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