ESG integration into Alternatives

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Adam Seitchik, Ph.D., CFA
Auriel Capital

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ESG integration into Alternatives

  1. 1. AURIEL CAPITAL MANAGEMENT<br />ESG integration into Alternatives<br />Adam Seitchik, Ph.D., CFA<br />Auriel Capital<br />TBLI Europe November 2009<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  2. 2. AURIEL CAPITAL: FIRM OVERVIEW<br /><ul><li>Auriel Capital Management was established in 2004 to provide absolute return strategies based on empirical research</li></ul> - Core focus: To combine thoughtful quantitative research with<br /> leading portfolio construction & risk management<br /> to produce uncorrelated absolute returns<br />- Regulation: Authorised and regulated by the FSA; SEC –<br /> registered investment advisor and a designated<br /> Qualified Professional Asset Manager (ERISA)<br /> - ESG: Research and integrate Environmental, Social and<br /> Governance (ESG) factors into equity platform with<br /> focus on return-seeking and risk management<br />2<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  3. 3. RESPONSIBLE INVESTING = RISK DIVERSIFICATION<br />Burst of Tech bubble (2000-02) soured market returns, leading to adoption of the “endowment model” of hyper-diversification<br />Diversification into new asset classes dependent on manager skill, including real estate, hedge funds, credit, and private equity<br />Now some institutional investors have become very active, and reduced passive equity holdings<br />The endowment model outperformed from 2000-2007, but there were few places to hide in 2008<br />3<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  4. 4. UN PRINCIPLES FOR RESPONSIBLE INVESTMENT<br /><ul><li>As institutional investors, we have a duty to act in the best long-term interests of our beneficiaries. In this fiduciary role,we believe that environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time).We also recognise that applying these Principles may better align investors with broader objectives of society. </li></ul>4<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  5. 5. THREE GENERATIONS OF RESPONSIBLE INVESTMENT – BUT MARKET RISK DOMINATES<br />Avoidance screening<br />Positive screening<br />Management of ESG risks and opportunities to enhance risk-adjusted returns (UN PRI)<br />5<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  6. 6. THE SUSTAINABILITY INDEX IS IN PARTA LONG/SHORT HEDGE FUND<br />6<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  7. 7. AURIEL CAPITAL: ESG INTEGRATION<br />7<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  8. 8. AURIEL CAPITAL: ESG RESEARCH PARTNERS<br /><ul><li>Comprehensive large-cap ESG data and ratings coverage</li></ul> - Asset4: 278 Key Performance Indicators, 2600 companies, 4-8 years of data<br /> - Riskmetrics: Intangible Value Assessment, Environmental Ratings, Carbon Beta, subfactors, research began in mid-1990s<br /> - EIRIS: Systematic ESG and avoidance screening coverage with European strength<br /> - Trucost: Rigorous estimation of company environmental damage and carbon footprints in monetary terms<br />8<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  9. 9. AURIEL CAPITAL: ESG INTEGRATION <br />9<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  10. 10. ELEMENTS OF A RESPONSIBLE ALTERNATIVE<br />Fees for alpha, not beta<br />Repeatable, transparent investment process<br />Rigorous, understandable risk management<br />Full disclosure of positions and performance attribution<br />Operational risk management<br />Embrace sensible regulation<br />Are regulated<br />10<br />RESPONSIBLE INVESTMENT STRATEGIES<br />
  11. 11. AURIEL CAPITAL: CONTACT DETAILS<br />adam.seitchik@aurielcapital.com<br /> +1 781 652 8314<br />RESPONSIBLE INVESTMENT STRATEGIES<br /> 11<br />8<br />
  12. 12. AURIEL CAPITAL: DISCLAIMER<br />This document is issued and approved by Auriel Capital Management LLP (“Auriel”), which is authorisedand regulated by the Financial Services Authority (the &quot;FSA&quot;). This document may refer to the Auriel European Equity Fund (the &quot;Fund&apos;) which is Irish domiciled. This information contained in this document is strictly confidential. <br />The Fund is an Unregulated Collective Investment Scheme (“UCIS”) for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (the &apos;Act&quot;) and as a consequence its promotion is restricted by law. In addition investors may not havethe benefit of the Financial Services Compensation Scheme and other protections afforded by the Act or any of the rules and regulations made there under. This document is a marketing communication and is intended solely for distribution to professional clients, eligible counterparties and those persons to whom the promotion of UCIS is permitted under the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 and COBS4.12 of the FSA’s Handbook.<br />Interests in the Fund will be offered for sale only pursuant to the offering memorandum of the Fund and investment into the Fund may be made solely on the basis of the information contained therein. Any analysis of potential trading strategies is used purely for illustrative purposes and does not represent a recommendation to buy or sell and does not represent Investment advice. <br />The information contained herein does not constitute an offer to sell or the solicitation of any offer to buy or sell securities and or any derivatives and may not be reproduced, further distributed or published by any recipient without prior permission from Auriel Capital Management LLP or Auriel Capital Ltd. <br />The information and opinions contained in this document are for background purposes only and do not purport to be full or complete. Nor does this document constitute investment advice. No representation, warranty, or undertaking, express or limited is given as to the accuracy or completeness of the information or opinions contained in this document by any of ACM, its partners or employees and no liability is accepted by such persons for the accuracy or completeness of any information or opinions. As such, no reliance may be placed on the information and opinions contained in this document. <br />The value of investments and any income generated may go down as well as up and may be affected by fluctuations in exchange rates. Past performance is not necessarily a guide to future performance and there can be no assurance that the Fund&apos;s objective will be met. Investors may not get back the amount invested. Please refer to the offering document for further details of the financial commitments and risks involved in connection with investment in such funds.<br />Data sources: Auriel, PFPC, Bloomberg, Thomson Financial, Asset4, Riskmetrics, EIRIS, Trucost<br />RESPONSIBLE INVESTMENT STRATEGIES<br />12<br />

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