Wespath Investment Management launched a new passively managed ESG U.S. equity index fund, managed by BlackRock and benchmarked to the Russell 3000 index, the investments division of the Glenview, Ill.-based $21 billion General Board of Pension and Health Benefits of The United Methodist Church announced Tuesday.
Wespath created the U.S. Equity Index Fund “by converting an existing $500 million separately managed segment of the organization’s $7.2 billion U.S. Equity Fund to a daily valued fund and offering it as a stand-alone investment vehicle,” a Wespath statement said. BlackRock was the manager of that passive part of the U.S. Equity Fund.
The U.S. Equity Fund will continue to hold units of the carved-out fund and will have no change in its $7.2 billion in assets, said M. Colette Nies, managing director-communications of the general board, in an e-mail.
BlackRock continues to manage another passive strategy in the U.S. Equity Fund.
“Northern Trust also manages passive strategies within the U.S. Equity Fund,” Ms. Nies said. “We prefer not to disclose the specific strategies or the amount of assets managed in these strategies.”
“While we continue to believe that our U.S. Equity Fund — which relies primarily on active management, and includes private equity and private real estate allocations — will generate risk-adjusted returns that exceed its Russell 3000 index benchmark over the long term, we recognize that some institutional investors prefer passive management within the U.S. equity asset class,” Derek Casteel, managing director of Wespath’s institutional investment services group, said in the statement. “Our new fund is designed to be responsive to this demand.”
The U.S. Equity Fund uses 27 external money management firms. About 30% of the fund has been passively managed.
The U.S. Equity Index Fund is designed to align with United Methodist values and “will leverage the capabilities of Wespath’s sustainable investment strategies team members,” engaging companies in which the fund invests on environmental, social and governance issues.
“Similar to Wespath’s other fund offerings, the U.S. Equity Index Fund excludes the shares of many companies involved in the production or sale of alcoholic beverages, tobacco, adult entertainment materials, and weapons delivery systems, and the management (or) operation of casinos or privately owned correctional facilities,” the statement said. “The fund will also exclude companies identified as being exposed to excessive sustainability risk in the areas of climate change and human rights.”
Despite these limitations, 97% of the market capitalization of the Russell 3000 index remained eligible for investment as of Dec. 31, the statement added.
“We believe that our active ownership practices — which often involve conversations with the management teams of the companies in which we invest — can result in changes to business practices aligned with United Methodist values,” and lead to greater shareholder value, said David Zellner, chief investment officer, in the statement.
The new fund is available to only United Methodist-affiliated organizations, including foundations, colleges and universities, hospitals and health-care facilities.
