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1 August 2008
Bloomberg: AHA Fund Beats Rivals With `Responsible'' Energy Picks
Source: www.bloomberg.com
By Sree Vidya Bhaktavatsalam and Christopher Condon
Aug. 1 (Bloomberg) -- AHA Socially Responsible Equity Fund''s Andrew Bischel has topped 98 percent of rivals this year by searching out rising natural-gas and energy stocks that met the fund''s investing standards.
The $60 million fund shuns companies that make money from tobacco, alcohol, weapons, gambling, nuclear power and abortion. Since the fund''s guidelines allow some energy investments, Bischel has made oil and gas producers his three top picks. The fund''s largest holding, Oklahoma City-based natural-gas producer Chesapeake Energy Corp., has surged 27 percent this year.
``Socially responsible investing somewhat lies in the eyes of the beholder,'''' Bischel, 56, said in an interview in Boston. ``Natural gas is far more efficient and environmentally friendly than fuels like coal, so where we can, we take the more environmentally friendly fuel.''''
Socially responsible funds seek to profit without investing in companies engaged in activities they deem ethically reprehensible or detrimental to the environment, with each fund setting its own criteria. Pax World Management Corp. agreed this week to pay $500,000 to settle a claim by the U.S. Securities and Exchange Commission that it failed to meet its own standards. In the first case of its kind, the SEC said Pax funds owned stocks it was explicitly barred from holding from 2001 to 2005, including shares of an energy exploration company.
It''s up to individual funds ``to decide what counts as socially responsible,'''' said David Kathman, a mutual-fund analyst for Morningstar Inc. in Chicago. The SEC action ``may make funds take a look at their largest prospectuses and make sure they are following'''' their own rules, he said.
Energy Bets
Bischel''s bets on energy helped limit the AHA fund''s decline to 5.2 percent this year through July 31, compared with losses of 13 percent by the Standard & Poor''s 500 Index and 11 percent by the Domini 400 Social Index, a group of stocks that have passed certain ethical criteria. His fund, which focuses on large-company stocks deemed cheap or undervalued, ranks in the top 2 percent of such funds, according to Morningstar data.
Morningstar gives the fund a rating of four of a possible five stars. It has a three-year Sharpe ratio of 0.14, compared with -0.03 for competing large-value funds. A higher Sharpe ratio means better risk-adjusted returns.
The AHA fund is managed by Bischel and Kenneth Kaplan, Joshua Rothe and Matthew Zuck, at San Francisco-based SKBA Capital Management LLC. The fund is owned by Chicago-based CCM Advisors LLC and affiliated with the American Hospital Association.
The AHA Investment Funds, which now have $300 million in assets, were started by the association in 1988 to provide hospitals with tobacco-free investments. They were opened to the public in 2004.
Top Picks
Bischel has benefited from rising energy prices, including a 29 percent gain this year. Chesapeake, which accounts for 4.7 percent of the fund''s assets, yesterday reported its 28th straight quarter of production growth and said reserves reached a record 12.2 trillion cubic feet of natural-gas equivalent.
The manager''s second-biggest holding is Unit Corp., a Tulsa, Oklahoma-based oil- and natural-gas driller that has jumped 46 percent this year. Patterson-UTI Energy Inc., a Snyder, Texas-based driller and the No. 3 holding, has climbed 48 percent.
The AHA fund invests in companies that it believes are cheap compared with financial yardsticks such as sales and price to cash flow ratios. Apart from its six ethical screens, the fund managers also apply what they call ``soft'''' screens to weed out companies with poor corporate governance.
Mattel Inc., the world''s largest toy-maker, was dropped from the fund in September after products made in China were found to contain lead paint, said Timothy Solberg, chief investment officer of CCM Advisors.
The managers will buy companies that have overcome scandals and ethical lapses, such as industrial conglomerate Tyco International Ltd., whose shares it acquired in 2006, and insurance broker Marsh & McLennan Cos., part of the portfolio for 17 months.
`Corporate Rehab''
``We think of them as corporate rehab stories,'''' Bischel said.
Bermuda-based Tyco, whose former Chief Executive Officer Dennis Kozlowski is serving a jail sentence for inflating the company''s revenue, is the fund''s ninth-biggest holding. The shares have advanced 12 percent this year.
Marsh & McLennan, which lost clients to a 2004 bid-rigging scandal, is the fund''s fifth-biggest holding. Shares of the New York-based company are up 6 percent this year.
Estimates of assets in socially responsible investing vary, in part because of differing definitions of such strategies.
The Social Investment Forum estimates there are $2.71 trillion in assets subject to social criteria, or about 11 percent of U.S. investment assets. The Washington-based trade group says there are $201.8 billion in 260 socially screened mutual funds, while Morningstar puts the asset figure at $45 billion.
Dallas-based GuideStone Capital Management, with $12 billion in assets, runs the largest family of mutual funds dedicated to socially responsible investing, according to Morningstar.
Calvert Asset Management Co. in Bethesda, Maryland, is second with $5.6 billion, followed by Chicago-based Ariel Capital Management Inc. with $4.1 billion.
News
7 August 2008
Asia Business News: SEB adopts the Principles for Responsible Investments
5 August 2008
SocialFunds: Half of S&P 100 Companies Published Sustainability Reports in 2007
1 August 2008
Bloomberg: AHA Fund Beats Rivals With `Responsible'' Energy Picks
31 July 2008
CityWire: Social investment expert calls for new view on green funds
24 July 2008
CityWire: Catalyst aims to revolutionise SRI model
23 July 2008
SRI-Adviser: Sunshine is the Best Disinfectant - Activists Promoting Corporate Transparency
22 July 2008
FOX Business: TD Asset Management signs on to the U.N. Principles for Responsible Investment
21 July 2008
The Daily: Going for responsible funds can be good for your wallet
20 July 2008
CNN: Banking on carbon trading - Can banks stop climate change?
18 July 2008
CityWire: Asset managers weak on responsible investment, says RImetrics
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Sustainable Investment Research Platform
Provided by Webforum