Hedge funds
Hedge funds offer an alternative approach to investments. Hedge funds and funds of hedge funds are emerging which include Responsible Investment criteria. There is ongoing debate over whether a hedge fund can be a Responsible Investment.
In this section:
Responsible Investment issues
Examples
Responsible Investment issues
Some people are concerned that hedge funds are not a responsible investment, on the grounds that hedge funds typically focus on the short term and seek gains by exploiting market inefficiencies. As a result, for example, rather than seeking to address management inadequacies through governance they may either short the company or actively seek a takeover. The concern for some is that this may not necessarily be in the long term interest of the company, other shareholders or society as a whole.
However, others might argue that hedge funds improve the efficiency of the market and that hedge funds applying Responsible Investment principles might increase the incentive for responsible corporate behaviour.
There are also issues about the level of risk involved in hedge funds and their lack of transparency and disclosure which is particularly relevant for Responsible Investors.
It is therefore important for charities to fully understand how a hedge fund operates and the issues raised by critics. Advisers and fund managers should be able to assist charities in this matter.
Examples
There are very few hedge funds or funds of hedge funds with Responsible Investment criteria on offer in the UK. Exmples include:
AIG Global Investment Group’s Good Steward Fund offers daily socially responsible screening.
K2 Advisors can overlay negative screens to its funds of hedge funds.
Morley SRI Long Short Fund (SRILS) employs proprietary SRI process to screen stock opportunities.
Disclaimer
The featured products have been selected as examples only. The inclusion of a particular fund does not imply an endorsement of it. Moreover, the use of an example does not imply a recommendation of it over any other example or further example used or of any product not listed.
