Eight Investment Partners launches 8IP Australian Equity Impact Fund

Tl;dr

  • The 8IP Australian Equity Impact Fund invests in companies that produce not only financial returns, but positive impacts on the environment or on social issues
  • This is innovative, because measuring positive impacts of investments is still at the leading edge of the investment management process
  • Fund manager Kerry Series says the fund is designed to capture investors’ interest in aligning values and investment outcomes

Eight Investment Partners (8IP) has launched a retail Australian equities fund that invests in ASX-listed companies that have a positive social or environmental impact.

8IP seeded the 8IP Australian Equity Impact Fund in January 2017, and it is currently invested in 29 companies that fall into nine sectors – affordable housing, renewable energy, care and support, wellbeing: health care services, education, wellbeing: medical devices, energy storage and efficiency, wellbeing: pharmaceuticals, healthy living, and land and resource management. The fund also has cash instruments for liquidity purposes. The fund is managed by Kerry Series, principal and chief investment officer, and Stephen Walsh, principal and portfolio manager. It is currently open to retail investors, and the minimum investment is $10,000.

“What we did was create what we call impact focus areas, and we have 10 of those at the moment,” Kerry says. “It was a bit of an iterative process, where we looked at what are the challenges, and what are the problems we face in society – renewable energy, education, healthy living, etc. Then we matched those focus areas to what sectors in the stock market ware likely to be addressing problems- healthcare is the obvious one, for example.”

The fund also screens out certain categories – alcohol, tobacco, logging of old growth forests, weapons, gambling, pornography, nuclear and fossil fuels. In addition to disclosing financial returns, 8IP also issues an annual impact report, where the fund explores how the companies in the portfolio bring social or environmental benefit as part of their business strategy.

“When we write the annual impact report, it’s based on the financial year data and we write it at the end of the calendar year,” Kerry explains. “What I want to do is measure the impact of the businesses, but because they’re listed companies, there’s a limit to what they’re willing or able to disclose. So what you end up doing is analysing output. Take Estia, for example. They’re an aged care provider, so you look at how much did you spend in refurbishment or adding new places. It’s a quality type assessment.

“I’ve actually sat down with Estia – they have a lot of data but they’re not willing to share it until the rest of the industry is more transparent. … You start by looking at output, investment and quality of investment operations. My aim and dream is that through time, companies will be required to report more and more data around their business and we will be able to deeply measure impact.”

8IP currently manages more than $250 million for institutions, retail and high net worth individuals, but the Impact Fund is its first foray into impact investing. The Impact Fund currently has around $2.5 million in assets under management, and has returned 28.56% since inception in February 2017.

“There’s a growing desire amongst investors to align their values with their investments, and part of the challenge is finding product that is investible to retail investors,” Kerry notes. “We need to develop the narrative of what impact investing is and what it means and get that out there for retail investors. There is a growing desire to see these kind of products offered to retail investors.”

Kerry believes that there is a correlation between companies that have positive impact and companies that perform well financially.

“It would make sense to me on two levels, in what I describe as embedded alpha in impact investing in listed equities,” Kerry says. “Investors, and increasingly, employees and customers are going to demand better standards, better quality from companies that they are affiliated with, and I feel like we’re looking at a universe that should outperform over time.”

In addition to fitting within the 10 impact focus areas that 8IP has outlined, each investment is cross-referenced to the UN Sustainable Development Goals and the portfolio has covers 9 of the 17 goals.