Australia, Corporate Governance and CSR, Funds Management, Personal Finance - Written by on Saturday, March 1, 2008 16:17 - 0 Comments

Smart Investor: Up to speed, March 2008

Smart Investor magazine, Up To Speed column, March 2008

Chris Wright

New Product

Global Deep Green Trust

What is it?

An international equities managed fund investing in environmentally beneficial areas, such as renewable energy, technologies which reduce environmental damage, medical devices, education, social infrastructure, sustainable agriculture and microfinance.

So an ethical trust?

Yes, but most ethical funds have a very broad investment remit in which they are excluded from companies that obviously are not environmentally friendly, but are under no obligation to invest in companies that actually make a contribution to the environment. Hunter Hall describes many of these activities as “frontier” industries, and in that regard it’s riskier and more akin to a small cap or emerging markets fund in its risk profile than most ethical funds are.

Who’s Hunter Hall?

A fund manager with a very strong track record through its Value Growth Trust, which has been running for 13 years and had achieved compound annual growth of just under 20% between its 1994 launch and September 2007, dramatically higher than local or global benchmarks. This is an international fund and follows ethical investment principles, as do all the manager’s funds.

Do ethical funds have a harder time making profits than those that do not follow ethical investment policies?

There are two ways of looking at this. One is that by limiting the universe of available stocks one is necessarily making it harder to match or beat the returns of unimpeded funds. Funds that considered resource companies to be unethical in recent years have clearly had a hard time of it compared to those that can invest freely in BHP Billiton or Rio Tinto. This fund does it tougher still: apart from its very specific choice of industries, the fund will make a stand by not investing in any company domiciled in a country which handles commercial whaling – which, most significantly, counts out all Japanese and Russian companies. All told, the fund lists over 40 countries it won’t invest in. Counting out Kiribati and Iceland is not such a big deal, but barring the fund from investing in China – including Hong Kong – and South Korea is a big impediment.

The other side of the argument is that companies which seek to improve the environment will necessarily be the ones that flourish and grow in an environment in which corporate and social responsibility are ever more important. In other words, the environmental stance is not so much an exclusion of opportunity, but is the opportunity itself.

What are the details?

Minimum investment fee of $5000; up to 4% entry fee, though that’s something you haggle with your advisor over; a 1.6% management fee and a performance fee of 15% of any return over the MSCI World Total Return Index with its dividends reinvested. It can hedge against movements in the currency and it aims to produce 12% a year absolute return after fees and expenses over a rolling five year timeframe.

 

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