REP.: Arnerich Massena has talked about its commitment to “forward-thinking investing.” What is that?
Sheree Demers Arntson: On the forward-looking investment philosophy, we spend a lot of time talking with the experts to really understand the global macro environment and where there are windows of opportunity, then we proactively go after capturing that opportunity.
Tony Arnerich: Prior to the crisis, we looked out and realized we have an ever-expanding population and are stressed in certain areas like water, food, energy, and health and welfare. We then looked at sustainability as a beautiful word.
REP.: Explain your sustainable investing approach?
TA: We as an investment firm today probably own more water or water-related assets in a portfolio than anybody in America. We own about 10 farms that are water-rich, with either perfected aquifer-pumping rights or primary Colorado River rights. During the time we’ve owned the water, the price that does transact on marketplace has gone from $100-$200 per acre-foot to $1,000 per acre-foot. If you’re able to present an investment thesis of scarcity and upward pricing, you’re able to find the implementer who has the skills to put the money to work, and then it works.
REP.: How do you get clients onboard?
TA: One in 100 of our clients comes to us because of what we do in sustainability. It’s not a groundswell. I would like to think that the clients who come to us are good investors. We’re discretionary, so if it’s within policy, we can just implement it. If it’s advisory, we have to cajole or sell or hammer clients, but only to a certain point, because if they say no, we’ll just let it go.
REP.: What are some of the biggest challenges RIAs are facing today?
SDA: One is the heightened fear of anything that doesn’t have daily liquidity. There is this hyper desire for liquidity, which unfortunately limits your investment opportunities. The other is this perceived belief that active management doesn’t add value. Looking at the entire market of active management, it isn’t easy. You really have to find talented teams; you have to do your homework. Not everyone is willing to do this, so I guess indexing is a viable option. But it is a threat to our industry, because there’s a lack of understanding and value for what active management can do.