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Hedge Fund Industry Sees Increased Demand for Socially Responsible Investments/Need to Alter Portfolios Accordingly

ByBritt Tunick

May, 2015 – As disasters like BP’s Gulf of Mexico oil spill highlight the many ways a company’s stock price and returns can be damaged, members of the New York Hedge Fund Roundtable have seen a significant increase in investor demand for socially responsible investments and believe that firms that fail to respond to such concerns will ultimately lose investors.

Corporate Social Responsibility was the focus of the Roundtable’s May event, where a panel of industry experts discussed the myriad of issues managers must now take into account in order to comply with institutional investors’ increasingly stringent socially responsible investing policies. “As socially responsible behavior has become increasingly important, a growing number of managers are now making it a focus of their investment strategies,” said Timothy P. Selby, President of the New York Hedge Fund Roundtable. “Many managers have concluded that investing with a purpose doesn’t mean sacrificing alpha. And as they have shifted their investments accordingly, fund managers are now helping to make the companies they invest in more conscious about socially responsible behavior.”

As part of the event, the Roundtable conducted its latest monthly survey on corporate social responsibility.

 

Following are some of the key findings of that survey:

  • When asked whether they believe interest in CSR investments is limited to a small portion of the investment community, or is something investors will ultimately demand across the board, 55% of respondents said CSR is here to stay and firms that don’t alter their portfolios accordingly risk losing investors; 32% said it remains unclear how big a part of the market CSR funds will ultimately become and 13% believe CSR will never be anything more than a small niche strategy.
  • When asked whether funds focused on CSR can generate the same kind of returns as funds without such limitations, 62% of respondents indicated that they believe socially responsible and sustainable investing are not mutually exclusive from attractive returns; 27% believe disasters such as the BP spill have made it clear that ignoring CSR issues pose a bigger threat to returns and only 11% of respondents believe having to adhere to CSR guidelines eliminates the possibility of having truly diverse portfolio.
  • 71% of respondents indicated that there has been a tangible increase in investors’ interest in CSR over the past six months. Nonetheless, though 47% of respondents said their firms are well aware of the increasing importance investors are ascribing to environmental, social and governance policies; only 20% of respondents indicated that their firms have begun aggressively advertising their CSR efforts and have created at least one fund dedicated to CSR investments; 19% said their firms have added CSR investments to their portfolios on a limited basis and 14% said their firms are not focusing on CSR investments at all and have felt no investor pressure to do so.
  • When asked which sectors within the CSR universe are most attractive/have the greatest growth potential for the near future, 42% chose power producers; 26% chose water utilities; 14% picked electrical equipment producers; another 14% selected multi-utility companies and only 4% picked machinery companies.

April’s “bonus” question: With Memorial Day and the beginning of summer rapidly approaching, respondents were asked what their dream vacation would be. 39% picked a week at the beach with family and friends; 33% chose a week of sightseeing in Europe; 10% selected a cruise to an exotic location and 4% would love to just spend a week at home alone to binge watch TV and lay around. Meanwhile, 14% of respondents asked “what is a vacation?”

 

About The New York Hedge Fund Roundtable:

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers. Monthly events center around thought-provoking speakers and panels designed to keep members apprised of timely and important issues within the alternative investment industry. The Roundtable’s goal is to provide a forum for thought leadership, where industry professional have the opportunity to enhance their knowledge and skills and to network with other individuals committed to advancing the industry with the highest ethical standards. For additional information about the Roundtable, visit: http://www.nyhfr.org