Hedge fund managers should exclude certain investments in their strategies and take a more open-minded approach to segregated accounts, to help asset owners comply with their responsible investment policies.
Speaking at a joint event between the U.N. Principles for Responsible Investment and the Alternative Investment Management Association, and hosted at money manager Man Group’s London offices, asset owners outlined their requests to hedge funds managers.
“Exclusions are an important part of how we implement responsible investment,” said Edward Mason, head of responsible investment at the Church Commissioners for England, London, which has a £6.1 billion ($9.2 billion) investment fund. “(We want to see) other asset owners that have exclusions as part of their policies to join us in asking for more responsiveness from the industry on this.”
Mr. Mason asked for hedge fund managers to “implement exclusions into standard products,” since “there are some that are extremely widely shared now,” such as indiscriminate weaponry. He asked for managers to create special share classes that are responsive to the needs of investors with exclusions, where “there is a great degree of commonality.” And Mr. Mason said he would like to see more open-mindedness in segregated accounts. “This is what really enables us to integrate our restrictions,” he said. “We want to know is it possible, what are the costs to it, and the implications to us as an asset owner.”
Mr. Mason said investment executives have a specific policy for alternative strategies, taking the form of a due diligence checklist. “Our checklist covers issues that may arise in different strategies. One thing we are particularly looking for is any potential to cause harm — to markets, businesses or vulnerable individuals.”
Speakers were also keen to dispel any myth that hedge funds and responsible investment cannot be synonymous. “There is a characteristic of our industry that hedge funds and responsible investment shouldn’t go together in the same sentence, let alone the same room,” said Mark Jones, co-CEO at Man GLG, a subsidiary of Man Group. “As the industry has matured and institutionalized, we the asset managers have become increasingly responsive to the requests from the asset owner side — we do owe our ultimate duties to you,” Mr. Jones said.