As AI-bubble fears spread, a US$35 billion fund manager positions for inflows
Impax has had a rough ride in recent years, as low-carbon investments that did not pan out were followed by lost mandates
[LONDON] Impax Asset Management Group is positioned to benefit should concerns about an artificial intelligence (AI)-driven bubble trigger a sudden shift away from Big Tech, its chief executive said.
The US$35 billion money manager, which targets low-carbon, sustainable investment strategies from its base in London, is already “seeing signs that those benefits are coming through”, CEO Ian Simm said.
The risk of a bubble building inside the tech giants driving AI is a recurring theme in conversations among investors these days, Simm said. That’s as hundreds of billions of US dollars get channelled into technology whose ability to generate sustained profits is still largely untested. For now, though, fear of missing out has fanned stunning valuation gains, prompting speculation that Nvidia alone might reach a market capitalisation of US$5 trillion.
Together, the so-called Magnificent Seven – Nvidia, Microsoft, Apple, Alphabet, Amazon.com, Meta Platforms and Tesla – account for almost 45 per cent of the Nasdaq 100 Index.
“A large number of asset owners now are worried about the narrow markets and are seeking to diversify their exposure to equities through non-Mag 7 type portfolios,” Simm said. “The market can’t carry on being so narrow.”
Impax has had a rough ride in recent years, as low-carbon investments that did not pan out were followed by lost mandates. The asset manager ended 2024 by losing a contract with St James’s Place, representing a roughly US$6 billion portfolio that ended up going to Schroders. Impax also saw outflows in funds sub-managed for BNP Paribas Asset Management, and sizeable redemptions from clients in North America, according to its half-year report.
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Simm acknowledged last year that Impax was late in realising the potential for gains in Nvidia, and took advantage of a temporary dip in the company’s share price to start building a stake. But the asset manager has generally stayed on the sidelines of Big Tech’s ascent, which Simm says has freed it to diversify its portfolio in a way that now leaves it less exposed to a potential sell-off.
“Impax is skewed definitely towards defensive growth and maybe small and mid-cap companies and tilts towards sectors such as industrials, materials and away from digital technology,” he said.
As Impax waits to see how Big Tech valuations develop, Simm says that the asset manager is still seeing some outflows among retail investors “who are not thinking mathematically or maybe even strategically” about their risk management.
At the same time, he says that there’s room to win institutional clients as some asset owners in Europe pull mandates from US money managers that withdrew from climate alliances. Against that backdrop, Impax has seen “some quite significant new mandates kicking off”, according to Simm, who declined to name potential new clients.
“We are excited about the pipeline for new business, particularly in the institutional space,” he said.
The Impax Global Environmental Markets Fund, with about US$2 billion of assets, is up roughly 13 per cent this year. Holdings include Microsoft and Nvidia, as well as more traditional green stocks such as Schneider Electric, Xylem and Waste Management.
Impax also offers private equity investments in clean energy, a sector that’s seen a rebound as AI feeds demand for power generation. The S&P Global Clean Energy Transition Index is up about 40 per cent this year, compared with a 11 per cent gain in the S&P 500 Index. The S&P Global Oil Index, meanwhile, is up less than 5 per cent in the same period.
“There is a power deficit in much of the Western world, and particularly in the US, driven in part by the demand for new data centres,” Simm said. “And there is, of course, a lot of interest in energy efficiency, given that energy prices and power prices in particular have gone up very strongly.” BLOOMBERG
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