As part of our review process at ethicalfutures, we monitor the investments that we have placed clients into so that we can advice you about changes in ethical, governance or performance issues. Generally we are happy with the performance of funds we recommend but we want to take this opportunity to flag a concern that we have about the ethical funds run by Henderson Global Investors.
On 22nd November 2011 the news slipped out (unintentionally) that Hendersons proposed to make their full SRI team (4 researchers & 2 fund managers) redundant. The intention is to replace the dedicated team who carry out primary research on both companies and ethical & sustainability issues and replace them with a simple screen provided by the Ethical Investment Research Service (EIRiS) whilst delegating management of the funds to other managers actively engaged in managing non-screened funds. Whilst the Henderson funds have had mixed performance over the long term, recent performance has been in line with or better than sector average and they have led the way in setting standards for research and development of the socially responsible (SRI) and sustainable investment market. Our concern lies on two fronts; firstly that management is being delegated as what is in effect a ‘part-time’ job to fund managers with no experience of running screened funds and secondly and perhaps more importantly, that the move represents a dilution of the firms commitment to the sector and the quality of research.
As a firm we have no problems with the work of EIRiS but in general have found that funds that simply purchase a screening list, do not fully appreciate the concerns or objectives of clients. In addition to this we have found that over the longer term, funds that do undertake primary research on both themes and specific companies provide a more coherent investment philosophy that includes active engagement with business for incremental improvements in their business management and often better overall investment return for the client.
We have actively engaged as part of the Ethical Investment Association in making our concerns known to Henderson and will be consulting directly with the firm to discuss their plans for the future. At present, we do not wish to make a ‘knee jerk’ reaction but if we are not satisfied with the long term prognosis’ for these funds we may in due course recommend disinvestment and re-allocation to another manager. The funds concerned are: Henderson Industries of the Future, Global Care, Global Care Income & Global Care Managed.
Copy of press release issues by Julian Parrott as Chair of the Ethical Investment AssociationEthical_Investment_Association_Press_Comment_-_Henderson_Global_Investors_disband_their_SRI_Team