Ethical fund manager explains how

By Chris Hutching

Friday 28th May 2004

Ethical funds in Australia have become so accepted by the market that the leading one, Hunter Hall Investment Management, now has more than $A1 billion under management.

Chief executive David Buckland has been in New Zealand outlining to financial advisers how his company invests in funds that avoid so-called unethical enterprises (booze, fags, gambling and guns) while achieving high-growth rates.

Based in Sydney, he offers an insight into Hunter Hall's "deep-value" investment philosophy.

The Value Growth Trust has a five-year performance of 18.3% annually and last year's performance stood at 49.5%.

Hunter Hall implements its ethical investment policy by restricting investment in businesses that are, in its opinion, involved in activities harmful to people, animals or the environment.

Specifically, this involves the use of a "negative screen" restricting investment in companies that derive revenues associated with the sale of armaments or tobacco, gambling, cruelty to animals, destruction of the environment and uranium mining.

The negative screen characterises the Hunter Hall trusts as "light green" in the Australian ethical investment community. A positive screen typically classifies a fund as "dark green."

Borderline cases arise where it is unclear whether a potential investment should be rejected. In such cases the Hunter Hall directors make the decision. A recent investment involved a company making a product to benefit cancer patients but also involving tests on animals.

"Taking into account all the circumstances including the manner in which the animal testing is undertaken, the directors formed the view the product's benefit to humanity outweighs the undesirable testing on animals."

On the other hand, a company that had a small investment in a business involved in animal testing was recently considered inappropriate.

The Hunter Hall investment team monitors all investments and if information becomes available so the investment is considered to breach the ethical investment policy, the investment is disposed of as soon as practicable at the best price possible, which may take some time.

Hunter Hall does not rule out investing in mining, the manufacture or sale of alcohol, or animal byproducts.

"We are of the view that mining does not necessarily cause permanent damage to the environment provided due attention is paid to site remediation, control of contamination, worker safety and the welfare of any nearby population."

Labour standards are not taken into account in the selection, retention or realisation of investments.

The trust primarily invests in securities listed on international stock exchanges outside Australia and New Zealand focused on small- and medium-sized manufacturing, service and distribution businesses in a concentrated portfolio of no more than 40 stocks where the total cost of an investment in any one company will not exceed 15% of the market value of the trust's portfolio.

Hunter Hall Investment Management was founded in 1993 with the objective of providing high-quality funds management services built on superior long-term investment returns through a deep-value investment strategy combined with an ethical investment screen.

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