N.Y. Firm Preps For Launch of 'Best of Breed' Hedge Fund

Jun 2 2006 | 8:33pm ET

Asset management firm Eco-Vest Advisors is preparing to make the leap from running separately managed accounts to managing a hedge fund. Peter Lusk, Jr., founder and managing member, expects to officially launch The Terra Verde Fund some time later this year. 

Just as the name implies, the New York-based firm has an ecological and a socially responsible component to its stock picking. Lusk explained that The Terra Verde Fund will be a U.S.-focused, all-cap, long/short vehicle and will be open to investing across all sectors, but will not buy stock in companies that fall into the bottom quintile of their sector when it comes to corporate governance and environmental performance.

"We strip out the bottom 20% of corporate governance and environmental risk offenders," Lusk said. "What we've seen is that the worst of breed significantly under-perform their industry average pier groups over time."

The fund will not employ negative screens, such as ruling out investments in tobacco companies, however, it will not invest in the worst offenders. Lusk utilizes the rankings from Innovest Strategic Value Advisors and IW Financial —both which provide in-depth company research —to make his decisions. These rankings were originally focused on the environmental impact of companies, but now they are weighted 60% for environmental issues and 40% for corporate governance.

Lusk, who was previously at ForstmannLeff and Lync Consulting before founding Eco-Vest in 2004, decided to add a green bent to his firm because he saw an imbalance in the supply and demand for this type of product.

"There was a large market for socially responsible investing, and there was a large market for hedged products, but no one was doing an environmentally or corporate governance-screened best of breed [product]," he said.

"It is a relatively elegant and simple solution to blending growth and value with an added twist of getting rid of the bottom 20% of corporate offenders," he said. The details of the fund are still being worked out.

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