For many years now individual and institutional investors have had a reasonably broad range of socially responsible portfolios to choose from among traditional, equity strategies. Until recently, investors in hedge funds have not been so lucky, with virtually no options available to them.
Now, however, hedge fund of fund managers are beginning to develop portfolios designed to proactively screen out companies in order to comply with faith-based investors’ issues such as alcohol, tobacco, gaming, pornography and abortion, among others. Firms like KLD offer services that can filter the investment universe to screen out companies that have unwanted exposures to these issues. Hedge fund of funds that have adequate transparency into their underlying managers can then use these services to have their managers comply with the screening mandates by not investing in those securities.
K2 Advisors has experience with socially responsible investing, having managed a socially responsible hedge fund of funds portfolio for a European government since 2002. We continue to see increased interest in this area and believe socially responsible investing will grow as a viable investment option for all types of socially responsible investor. We anticipate increased asset flow to this segment of the market and expect to increase our participation in the management of socially responsible portfolios both for faith-based and for environmental, social and governance investors.