Teamwork pays off for BT
BT Investment Management has leveraged the input of more than 30 investment analysts to take out the Ethical/Socially Responsible Investment category in this year’s Money Management/Lonsec Fund Manager of the Year awards.
The BT Wholesale Ethical Share Fund is managed by BT Investment Management head of equities Crispin Murray.
Co-portfolio manager of the fund Rajinder Singh said Murray’s experience helped the fund outperform its benchmark by 0.55 per cent for the 12 months to 31 March 2012.
The BT Wholesale Ethical Share Fund employs negative and positive screens to limit the universe of stocks the fund can invest in, Singh said.
The negative screen excludes companies involved in alcohol, tobacco, weapons manufacture and gambling. It also screens out companies that fail on the sustainability front with environmental, human rights or corporate governance breaches, Singh added.
“The positive screen looks for two types of companies: Leaders in their industry that set a standard well above their peers, or companies that are in sustainable industries,” Singh said.
The fund employs Regnan (which is partly owned by BT Investment Management) to carry out its ethical/sustainability research.
“They have over 12 people that specialise in this area, with offices in Sydney and Melbourne,” said Singh.
In addition to the analysts at Regnan, the fund also utilises the BT equities team which consists of over 20 stock-pickers, making it “one of Australia’s largest research teams”, said Singh.
Singh said the fund is receiving increasing interest from investors who are interested in environmental, social and governance (ESG) issues.
“People are realising the benefits of having appropriate corporate governance structures in the companies they’re investing in. There’s no point having a great franchise if the board and management aren’t incentivised or structured the right way,” he said.
The BT Wholesale Ethical Share Fund has funds under management of just under $150 million.
Taking out second place in the category is Australian Ethical, with its Smaller Companies Trust.
Australian Ethical chief investment officer David Macri said his company has an ethical charter that is “quite onerous” and green credentials that “date back over 25 years”.
While the fund does invest in some larger companies that are best of sector, it is more tilted to innovative biotech, IT and telco companies, said Macri.
The outlook for the ethical sector is brighter than ever before, he said.
“There’s a lot more focus on it and acceptance that you don’t have to sacrifice returns investing this way, and indeed there’s actually a positive correlation between ESG factors and alpha,” said Macri.
Rounding out the category is boutique manager Alphinity Investment Management with its Socially Responsible Share Fund.
Alphinity principal and portfolio manager Bruce Smith said the fund uses research provider CAER’s database for the screening process.
One of the biggest challenges in the current market is finding defensive stocks that aren’t screened out by the fund’s ethical charter, said Smith.
Since companies such as Woolworths, Wesfarmers and Fosters are unavailable, Alphinity has looked to Telstra and Australian infrastructure stocks to play a defensive role in the portfolio, Smith said.
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