How do you expand your firm to more than $4 billion in AUM?

Lisette Cooper, founder of Boston-area RIA Athena Capital, chalks up a chunk of her firm's growth to a specialty in impact investing: helping clients align their investments with their value systems.

“I’m passionate about it,” Cooper says. “I really like this idea of enabling our clients to express their lives in the fullest way possible and to use their wealth to do that. I’m happy to implement whatever program is important to someone that is not harmful.”

Cooper says Athena’s experience in the area stems from the firm's early work with large financial institutions and, later, with the high-net-worth executives that run them. “We’ve always been the investor’s investor,” says Cooper, a Harvard Ph.D. in geological sciences who detoured into finance after graduation.

After working for several years at Merrill Lynch, she launched her own firm. And in the early '90s, she says, she began helping two mutual fund companies focus on what was then called “socially responsible investing” -- primarily using negative screens to avoid investments in sectors such as weapons development and alcohol, as well as in politically divisive countries like South Africa, then still operating under an apartheid regime.

“That was the state of the art in the 1990s,” she says. “People wanted to make sure that they weren’t investing in companies that did business with South Africa.”


But there was a downside to the earlier approach, Cooper says: Negative screens did not correlate to strong returns.

More recently, advisors like Cooper have opted for a new approach to socially responsible investing, with a new label: impact investing. Instead of simply screening out trouble areas, impact investing refers more broadly to the alignment of clients' values with their portfolios. (This has also coincided with the entry of profit-minded entrepreneurs into what had formerly been the domain of charities and nonprofits.)

Only about 15% to 20% of Athena’s clients will trade market return in order to invest in values-driven projects, she says. For the rest, Athena’s task is to find the same -- or better -- returns in these investments than they would get in the general market.

“Impact investing is our subtitle,” she says. “First and foremost we are about great investments.”

Cooper says it was two large clients -- both with clear agendas and more than $100 million to invest -- who helped her hone a fully realized strategy around impact investing.

One was a public figure who knew she could run into trouble if her investments weren’t fully aligned with her public pronouncements.

“She appears on TV,” Cooper says, “and is very politically active and outspoken on social issues and has a very strong view as an opinion leader. She felt that she really wanted to make sure her portfolio was consistent with what she was saying in public.”

The other client, she says, was a Catholic man who wanted to move all of his resources into investments consistent with his religious beliefs. Cooper helped him use guidelines from a group of Catholic bishops, as well as other advice, to redesign his investments.

“Now that his portfolio is fully transitioned” to an impact strategy, she says, “he is funding the seed capital for a Catholic fund so that others can get access to his hard work.”


Today, many new clients come to Athena to take advantage of this specialty, Cooper says -- and most of the firm’s clients have at least some interest in the subject.

“The bulk of our clients, if they can get a market rate of return and incorporate their values, will do it,” according to Cooper. “But typically those portfolios won’t be 100% impact, because you can’t find that in every asset class. It’s very difficult to implement a 100% impact portfolio without having some consequence to performance.”

Among Athena’s impact investing strategies:

1. Know the trade-offs. Be prepared to give something up, Cooper says. Although her firm generates strong risk-adjusted returns through impact investing, she says, clients often must trade a desirable attribute such as liquidity for a three-year investment period to get it.

2. Consider cash options. Athena tries to apply a client's values to each asset class. That means one of Athena’s clients put her cash in community banks instead of large financial institutions.

3. Develop fixed-income priorities. Cooper suggests municipal bonds that invest in infrastructure or other improvements -- such as a bond for pollution control. “That’s to the social good,” she says. Cooper uses Breckinridge Capital Advisors, a bond manager that she says offers a customizable service.

4. Use equity funds. In equities, the easiest way to implement impact investing is through funds that meet the objectives that your clients are interested in with separate accounts. Cooper says Athena uses Parametric, a Seattle asset management firm: “They have a role in pretty much all of our impact clients’ accounts."

5. Get private equity promises. For private equity investments, Cooper will ask fund managers for a side letter guaranteeing that the fund will not invest in certain areas that her clients object to. Or if they do invest in those areas, she asks them to commit in writing that they will not use any of her clients’ funds for them. In real estate, for instance, “if a manager invests in things like office buildings and hotels and multi-family housing, that is fine,” she says. “But [for her Catholic client], you absolutely cannot invest in abortion clinics or hospitals that perform abortions, or any industrial buildings that produce weapons.” For Cooper’s pro-choice clients, meanwhile, funds that invest in abortion clinic construction can generate higher returns, given the risks attached to those projects.

6. Choose focused hedge funds. Athena still uses the global hedge fund run by former Goldman Sachs executive David Blood and former U.S. Vice President Al Gore, the Generation IM Global Equity Fund. Colloquially known as the “Blood and Gore Fund,” it is run by Generation Investment Management. “That was one of the early impact investing funds. It’s done really well,” Cooper says. "They’ve compared very favorably to their peer group."

7. Take your time. Typically it takes about three years to transition a portfolio to an impact investing strategy, Cooper says: “It’s an iterative process.” 

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