Hedge fund managers increasing use of responsible investment principles

Hedge fund managers have invested at least $59 billion globally using responsible investing principles, results of a survey of 80 investment management companies by the Alternative Investment Management Association and the Cayman Alternative Investment Summit showed.

AIMA surveyed its hedge fund membership in February to gauge the level of investment and demand for responsible investing practices including ESG, socially responsible, impact, sustainable, ethical and green investment.

"Hedge funds have always been particularly active in the G (governance) part of investing within their strategies but we wanted to gauge the extent to which they also were incorporating the E (environmental) and S (social) elements in their approaches," said Thomas Kehoe, AIMA's London-based global director of research.

The AIMA/CAIS survey found that 40% of respondents said they already are employing responsible investing principles for about $59 billion under management. That's about 11% of the aggregate $550 billion of hedge fund assets under management by members of the survey universe as of Dec. 31, Mr. Kehoe said.

One in five respondents said they have committed at least 50% of assets under management to responsible investing.

Overall, the survey results showed that there's been 50% increase in demand for responsible investing from current or prospective investors, with 71% of North American-domiciled hedge fund managers reporting increased demand compared to 50% of European managers.

Larger hedge fund managers running at least $1 billion are more likely to be incorporating responsible investing into their investment programs, with 80% indicating they have beefed up their capabilities in this area, compared to about one-third of firms managing less than $1 billion.