American International Group (AIG) has launched a fund designed to provide socially and environmentally conscious investors with total return, including capital appreciation and current income, while investing in companies that meet certain environmental, social and governance (ESG) standards.
The AIG ESG Dividend Fund is a large-cap value fund that provides investors the opportunity to achieve returns based on dividend yield as well as a combination of factors that relate to profitability, valuation and ESG standards.
The AIG ESG Dividend Fund is part of a suite of funds advised by SunAmerica, which rebranded its retail mutual fund family to AIG Funds earlier this year. AIG Funds is one of the largest fund families offering portfolios in a broad range of asset classes, from equities to fixed income and alternatives. Its flagship AIG Focused Dividend Strategy Fund, a large-cap value fund that uses a proprietary rules-based process to invest in high dividend-paying stocks, has been highly rated by Morningstar for periods ending 31 March 2017.
“We are excited to add the AIG ESG Dividend Fund to our mutual fund family,” says Peter Harbeck, chief executive officer of SunAmerica, which serves as the investment adviser of the new fund and is an indirect wholly-owned subsidiary of AIG. “The Fund’s investment process allows us to look at a broad array of factors and evaluate how well a company manages its ESG risks in conjunction with our unique rules-based process.”
The fund employs a disciplined, rules-based investment process to stock selection. It includes up to 40 dividend yielding stocks selected annually from the Russell 1000 Index, based on four rules-based metrics – dividend yield, profitability, valuation and ESG rating. Although the portfolio is rebalanced annually, securities may be substituted in between the annual rebalance under certain limited circumstances, including where a security no longer meets the ESG standards or dividend yield criteria.
In addition to including ESG ratings in its rules-based process, the Fund’s ESG screening process excludes companies that, among other things, are significantly engaged in: the manufacture or distribution of alcoholic beverages, tobacco products, or military weapons; the production of nuclear energy; or the operation of gambling-related businesses. Unlike some other socially conscious funds, the AIG ESG Dividend Fund invests in many types of businesses – even utility and energy companies – provided those companies perform well on ESG criteria.
Kara Murphy (pictured), chief investment officer of SunAmerica, says: “More and more companies are incorporating ESG standards into their business models, and are finding that by addressing environmental, social and governance issues, they have the potential to improve financial returns. This trend, coupled with new research capabilities and enhanced data, gives us the opportunity to evaluate how well a company manages its ESG risks. The appetite for ESG investing has continued to grow in the US, especially as we see more investors wanting to make financial decisions that are consistent with their values.”
SunAmerica’s investment team has managed social strategies since 2001 and currently manages USD1.2 billion in social strategies across AIG’s relevant business lines. The AIG ESG Dividend Fund is overseen by Kara Murphy and is managed by lead portfolio manager Tim Pettee, as well as co-portfolio managers Timothy Campion, Jane Bayar Algieri and Andrew Sheridan.