Hedge fund managers employing socially responsible investment screens could win allocations from religious and other institutions, says investment consultant Cambridge Associates.
"Investors with SRI guidelines need not necessarily compromise access to institutional quality fund managers and the attractive risk and return characteristics they bring to portfolios," said Jessica Matthews, associate director of mission-related investing at Cambridge Associates, in a statement.
"For years, a number of our clients have been applying SRI principles in their traditional stock and bond investments by screening out certain securities. However, alternative assets like hedge funds have thus far been the hold-outs, and therefore compliance with SRI policies has often resulted in excluding hedge fund investments altogether, or required an uneasy compromise by excluding hedge funds from SRI scrutiny."
Cambridge encourages managers to create a separate share class within their existing funds that excludes securities that don’t meet SRI guidelines—even providing a list of restricted securities managers can use to audit their funds and ensure a screened class makes sense.
Cambridge Associates' mission-related investing group was formed in 2008 to help the firm's clients participate in the rapidly emerging arena of mission-related and socially-responsible investing.