UK investment provider Virgin Money is launching the Virgin Climate Change Fund, advised by leading hedge fund manager GLG Partners, which will invest in high-performing, environmentally-f
UK investment provider Virgin Money is launching the Virgin Climate Change Fund, advised by leading hedge fund manager GLG Partners, which will invest in high-performing, environmentally-focused companies with the aim of achieving market-beating investment returns.
Unlike typical green funds, the Virgin Climate Change Fund can invest in all industry sectors but will only invest in companies with lighter than average environmental footprints for their sector. This strategy aims to capitalise on research that suggests that companies with a strong environmental focus can outperform their less ‘clean’ competitors.
The fund is being launched at a time when consumers are increasingly demanding more information about the environmental damage companies cause. Research from Virgin Money suggests that up to 29 per cent of UK consumers – around 10.9 million people – have favoured products and services from environmentally-aware companies in the past year, while 68 per cent say they would pay more attention to climate change if data on companies’ carbon footprints was more readily available.
GLG Partners will be the fund’s adviser, while environmental research organisation Trucost, which wrote the UK Government’s environmental reporting guidelines published in 2006, will provide the environmental data.
Up to now GLG’s investment products have been available only to high net worth and institutional investors. Since launching its first fund in 1997, GLG has achieved a 16.8 per cent net-of-fees annualised invested capital weighted return on its alternative strategies through September 2007.
GLG already manages a similar fund to the Virgin fund, the GLG Environment Fund, which returned 7.02 per cent net of fees between January and December last year, compared with 1.62 per cent for the MSCI Europe Index over the same period.
Like the Virgin Climate Change Fund, the companies in that portfolio are chosen from a performance and then environmental standpoint, with industry is excluded. Companies currently held in the GLG Environment Fund include BG Group, Xstrata and Renault.
Virgin Money chief executive Jayne-Anne Gadhia says: ‘We’re delighted to be able to bring GLG’s expertise within reach of all UK investors and deliver a high-performance investment fund which is also better for the environment.
‘The climate change issue is too often seen as one where consumers have to pay a price. Our new Climate Change Fund is a straightforward way for investors to put their money into companies at the forefront of changing how businesses operate. And far from having to compromise on investment performance, this strategy actually improves it.’
Pierre Lagrange, co-founder of GLG and adviser to the Virgin fund alongside Ben Funnell, says: ‘Companies that do not adapt to changes in public opinion on environmental impact could see their returns suffer in the future.
‘Governments and regulators are likely to increase costs for companies which do not take into account environmental impact and encourage those that do with subsidies and tax breaks. That creates opportunities for managers such as GLG to invest in high-performing greener, cleaner companies and produce strong returns for investors.’
At least 75 per cent of the fund will be invested in an environmentally-filtered basket of European companies with a lighter than average footprint for their sector. Up to a further 15 per cent will be invested in solution adopters – companies adopting environmental best practice – and up to a further 10 per cent will be invested in solution providers, firms specialising in offering solutions to environmental problems.
The Virgin Climate Change Fund is available through IFAs and directly to the public within Virgin Money unit trusts, Isas and Peps, with a minimum investment of GBP50 a month or a GBP500 lump sum. There are no initial charges, but the annual management charge is 1.75 per cent.
A 20 per cent performance fee is payable if the fund outperforms two benchmarks, the Bank of England base rate and a high water mark calculated as the previous highest unit price reset on a rolling six-monthly basis.
Established in 1995, Virgin Money is the financial services arm of the Virgin Group, offering its nearly two million customers and retail financial products including credit cards and personal loans, deposits, investments and pensions, and life, household and car insurance to the UK market.
GLG Partners, which focuses on preserving capital and achieving consistent, superior absolute returns with low volatility and low correlation to the equity and fixed-income markets, had gross assets under management of some USD23bn at the end of September.