It sounds almost too good to be true: making cash by curing cancer? Exactly how can easily something so unequivocally great for humanity likewise yield a financial return? However that is specifically exactly what UBS recommends for its ultra high-net-worth clients. Those that have actually dollars they can easily put away for the long haul can easily now invest them in potentially life-saving cancer research and chance for a venture-capital-love return down the line.
The Swiss wealth management giant has actually likewise partnered along with MPM Capital, a bio-venture fund manager along with a long tape-record of recognizing breakthrough therapies and developing companies to bring them to market. As of mid-December UBS had raised $340 million for their joint oncology initiative.
This is called impact investing, and if you job in financial services or you’re a millennial, it’s rather most likely that you’ve heard of it. On the others hand, you could not actually understand exactly what it means. Some confuse it along with so-called socially responsible investing (SRI), which does not constantly aim to offer a competitive financial return. However impact investing has actually been billed as a different breed, specifically made to provide investors solid risk-adjusted returns, which need to bring the asset category far wider appeal.
Oncology research is a perfect target: not only has actually nearly everyone been touched by cancer, there are crucial gaps in research funding, and today approvals for cancer drugs are fast tracked. every one of this means the potential financial returns are helpful for investors along with long term investment horizons. And of course, nothing can easily compete along with the potential personal rewards that come along with assisting to save lives.
I very first heard regarding UBS’s oncology investment job from Simon Smiles, Chief Investment Officer for Ultra higher Net Worth at UBS Wealth Management, that I met in Hong Kong at Asian Financial Forum a few years ago. along with this news, I was immediately floored by the tip that the wealthy could put their riches to job in such a beautiful and life-affirming way, so I circled spine to Simon to discover out much more regarding it this week. Below is an edited excerpt of our conversation regarding UBS’ oncology impact investing drive and its efforts to bring impact investing in to the mainstream.
April Rudin: exactly what makes oncology research a wonderful investment right now?
Simon Smiles: It’s an investment thematic we’ve been looking at for well over a year. You start along with an incredible social need: unfortunately cancer has actually impacted almost everyone. One in two men will certainly contract cancer in their lifetime and one in three women, and those numbers are only going up, in part, since we’ve cured a number of illnesses that used to prove fatal to people. The good news is the scientific breakthroughs we’ve had have actually started to get particular traction, along with the human genome project, the HPV vaccine, which is largely eradicating cervical cancer among adolescent girls. Looking forward we’ve reached a course where we are not merely curing cancer However curing cancers.
And after that the third element, it’s a rather favorable regulatory environment, along with the fastest approval for a cancer drug by the FDA earlier last year. At the end of the day, once you’re dealing along with an ailment that can easily become terminal for individuals within a relatively short period of time, a drug which has actually efficacy and can easily potentially save a person’s life tends to be approved irrespective of the relatively minor edge effects. So favorable regulatory environment, incredible advancements in the science and dire need, and this is going to be an investment opportunity, not merely for one-two-three years, However much more most likely one-two-three decades.
Rudin: exactly what kinds of investors can easily make the biggest impact along with this sort of investment?
Smiles: It fits perfectly along with numerous of our clients. One advantage private investors have, is the ability to deal along with illiquidity, and they likewise have actually the opportunity and the default to believe long term. Almost every one of the ultra higher net worth clients I speak to has actually either gained their cash in business or has actually inherited a family business which has actually led to their wealth. And once you’re operating businesses over the path of a lifetime or lifetimes, as along with the case of a family business, you’re not frequently thinking regarding a quarterly earnings cycle, you’re thinking regarding the longer-term strategy. Investment themes that naturally lend themselves to an illiquid structure are a rather good match along with the investment preferences and advantages that numerous of the ultra-high-net-worth investors have. once you consider institutional investors, where you’re being benchmarked on a weekly, monthly, quarterly basis to the returns of your peers, you just can’t afford, based on profession risk, to take the same sort of long term view along with respect to your investment profile.
Rudin: Exactly how does UBS pick the sort of oncology research it will certainly invest in?
Smiles: There are a number of means to invest in oncology research. The large pharmaceutical companies have actually varying degrees of exposure. One area I believe has actually particular promise from a risk-return profile is academic research, and specifically at that early stage, proof of concept trials. It’s at that stage that inflection along with respect to valuations comes through and it’s a spot where if you’re partners along with the right sort of manager, and along with experts in the field, of which there are relatively few, there is actual value.
Taking the bigger picture view, and looking at this stage of the research, the investment opportunity plays in to the advantages that our ultra-high-net-worth clients have, the long term view. In addition to that, you not only end up along with an investment that not only has actually rather favorable risk-return characteristics, However also, has actually the additional element that at the end of the day, you’re making a return on your investment by assisting to cure cancer.
Rudin: exactly what will certainly it take for impact investing to reach the mainstream?
Smiles: Impact investing to date has actually been a rather niche area. There’ve been particular advocates and there’s been a great deal of passion among that rather small section of the industry and client based focused on it. However for the mainstream investors that we talk to, they frequently grab confused regarding the blurred line between giving and investment. And they’d frequently prefer to provide to charity or philanthropy fairly compared to invest in something that will certainly offer exactly what is frequently perceived as a substandard return.
And so changing that paradigm, and focusing on points along with a terrific risk return, in line along with venture capital returns, that can easily likewise do good is something that resonates, or has actually been resonating along with our clients.
We would certainly love to see impact investing go mainstream. As the largest wealth manager in the world, we are committed to attempting to do our section to effect industry change. And both areas, is one, focusing on larger scale opportunities fairly compared to niche, rather small opportunities, which can easily likewise have actually social impact. The second is, changing the paradigm. In the past, numerous impact investments have actually been presented to clients as, “you need to invest in this since it’s good, and you could make money.” Instead, we’re flipping that on its head and looking for wonderful investment opportunities along with truly attractive risk-return, which likewise do good. That modification of paradigm has actually had a rather profound effect on clients’ willingness to think of them, in particular clients that had never ever identified as impact investors.
Rudin: Aside from oncology research, where else can easily these kinds of investment opportunities be found that are the 2 mainstream impact and have actually truly attractive risk-return profiles?
Smiles: We’re looking at a range of different areas and the opportunities abound. You check out the dire global necessity for food, and meals that is created in a means that is environmentally sound. There is a huge boost in requirement for protein. Unfortunately traditional sources of healthy protein such as meat are rather water intensive and power intensive. Aquaculture, fish farming in particular, is a potentially wonderful area for further investment. Done in an ecologically and environmentally sound fashion you can easily have actually a rather positive impact on the environment and generate a sustainable source of protein, while likewise making terrific risk return. There are opportunities to job along with governments to boost the power efficiency of buildings through retrofitting and to make a substantial and attractive yield return on that investment. We’ve looked at pooled catastrophe risk. So it’s rather a wide range of areas. The commonality being we’re looking for truly compelling investment returns in areas that likewise do good and have actually a positive impact.
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