There is a new player in the socially-responsible mutual fund arena. Friends Ivory & Sime, best known as an institutional global money manager based in London, has launched two new no-load socially responsible funds.
The Friends Ivory Social Awareness Fund invests in domestic large-cap companies and the Friends Ivory European Social Awareness Fund invests in large-cap companies across Europe. Both will invest according to a multi-part investment process that will screen firms for both their individual financial strength and adherence to socially-responsible principles.
The Friends Ivory European Social Awareness Fund is believed to be the first socially-screened Pan-European fund. The fund now has its initial holdings spread among a dozen countries, including the United Kingdom, France, the Netherlands, Italy and Spain.
These are Friends Ivory's first mutual funds offered to U.S. investors and the first offered to retail investors. Friends Ivory, with $60 billion in assets under management, has been managing money both globally and in the United States for institutions and high net worth clients since the 1800s. Friends Ivory maintains offices in Edinburg, Scotland, Hong Kong and New York.
"We are determined that we are going to become one of the leading players in the socially-responsible investments market," said George Walker, president of Friends Ivory Funds. "Social issues are not local issues, they're global. We bring our global perspective."
While Friends Ivory may be new to the U.S. mutual fund industry, the firm has developed a substantial following globally. Friends Ivory began running its first socially-screened portfolio in 1984.
But unlike many of its U.S. competitors, Friends Ivory is not solely a socially-screened investment manager. Only some of the portfolios it manages for institutions and high net worth investors fall under the socially-responsible screening mandate, said Walker. The firm will take advantage of its reputation as a savvy global equity manager and as a socially-responsible global manager to attract retail investors to its new U.S.-based socially-screened mutual funds, Walker said.
"The U.S. is the largest socially responsible equity market," said Walker. "The demand is here in the U.S. and there's more and more interest in social investing." The Friends Ivory European Social Awareness Fund was created to meet an unmet demand in the European market, he said.
Demand for socially-responsible investing is growing rapidly, according to a report released last summer by the Social Investment Forum in Washington, D.C. Socially-responsible investments in the U.S. alone totaled $2.16 trillion last year, versus $1.19 trillion in 1997, according to the report. That growth rate of 82 percent is nearly double the rate at which assets flowed into broader markets. Mutual funds, which invest under a strict social mandate, have also seen the benefits of increased interest. Assets in socially-screened funds grew by 60 percent to $154 billion under management in 1999, said the report.
The two new Friends Ivory funds will invest with a three-pronged approach. The fund managers will sift through the universe of potential companies to find portfolio candidates.
"The process is investment led," said Walker. "We must like a company before we'll look at it socially."
The second step of the screening process is screening out companies with ties to tobacco, gambling, alcohol, pornography, weapons and nuclear power.
Then the fund scrutinizes firms for environmental reporting and environmental habits, the safety and quality of their products, the quality of benefits and whether they are equal opportunity employers. Once the managers invest in a company, they will try to influence policies they feel should be altered.
But Friends Ivory faces formidable competition from long-standing brand name advisers such as Calvert Group of Bethesda, Md., Domini Social Investments of Cambridge, Mass., Parnassus Funds in San Francisco and Pax World and Citizens Funds, both of Portsmouth, N.H.
Other socially-responsible fund advisers, however, are part of a cooperative network, not adversaries, said Walker.
"There's room for all of us to grow because the demand is strong enough for all of us," Walker said.
To further gain recognition for its new funds in the U.S., Friends Ivory has taken the unusual step of indefinitely donating 10 percent of its funds' management fees to children's groups in the U.S. to provide environmental education.
"You want kids to grow up understanding the importance of their environment," said Walker. "We're putting our money where our mouths are."