Wednesday, December 22, 2010

Interface: Rolling the red carpet for Ray

To all of our Readers:
If there’s any one company that exudes all that this website stands for, then it’s Interface (IFSIA).  Interface is to the corporate soul like the late Ray Charles was, and still is, to music.
Despite its risks (and there are always risks) I like this company, I like what it stands for, its vivacity and inventiveness.
Interface is not the kind of company one imagines as being Socially Responsible.  It’s kind of small, scrappy and its products (modular carpet tiles) were made with chemicals – many of which were toxic.   However…something happened one day when founder (and author) Ray Anderson received an inspirational “ah-ha” moment from a customer.
As Ray describes, it was a dramatic wake up call, analogous to “a spear in his chest.”  He then challenged his employees...
“to head the first company that, by its deeds, shows the entire industrialized world what sustainability is in all dimensions: people, process, product, place and profits – and in doing so, become restorative through the power of influence.”
But rather than letting me explain, I’ll hand over the microphone to Mr. Anderson.  Later, our website will follow-up with an in-depth analysis.  You know, a wise man once said that, “we think with our heads when we should be thinking with our souls.”  Well, my friends, this is one of those times!

Thursday, December 16, 2010

Update on Socially Responsible Investing TRENDS

Gee, right after we finished writing our 5-part series on SRI Trends, released its latest survey on the subject.  I read the report to determine if there were any changes worth talking (actually more like writing) about.
The biggest change, or more like surprise, was the continued growth in SRI assets, despite the troubling waters of capital markets.  In fact, SRI has not only become increasingly popular, but Hip!  From the start of 2007 to the beginning of 2010, SRI assets increased more than 13%.  Total AUM was $3.1 trillion excluding the effects of overlapping strategies.  (See table).  This compares with anemic growth of 1% for overall professionally managed assets.  Demand for Socially Responsible Investments has come from the “grass-roots” efforts of investors, and not from the institutions (or their portfolio managers) themselves.
The fastest growth of what’s categorized as ESG investing vehicles was what is called Alternative Investment Funds.  The Social Investment Forum Foundation identified 177 of these vehicles with AUM of $37.8Bn.  Alternative investments vehicles include ones I’ve focused on in my 5-part Series such as Hedge Funds (mostly quant funds) as well as private equity.  Can private equity really do good, or is this an oxymoron?
The number of alternative investment vehicles incorporating ESG criteria increased 285% since 2007, while AUM grew an even faster 6x.  Surprisingly, leading investment criteria were clean technology versus what I had expected would be quantitative funds that screen.
On the U.S. Registered side of SRI, there were 281 mutual funds with $320.3Bn under management.  Most of this was to the ever familiar mutual funds.  The smallest share was to Closed-end funds (just a bit over $200MM).  However, the fastest growth was in Exchange-Traded-Funds (“ETFs”) growing 225% since 2007, to $4Bn.  While still a relatively small AUM, we expect ETFs to continue leading the way in SRI.  As mentioned previously, we like the growth being witnessed here, but are disturbed by the disassociation of the individual investor from the ETF’s investments, and the tendency of ETFs to become like casinos.  (Please review Part V of our SRI Trend series for additional information.)
Going forward, I continue to expect ETFs to grow quickly as well as Social Venture Capital and Private Equity.  As you know, I’m no fan of ETFs or of Private Equity.   However, Social Venture Capital (and Social Enterprise) are areas I believe SRI can really make a difference in society.
The question is:  Would you rather help society, or make a quick-buck investing in an ETF ?

Helios and Matheson: I’ve seen this movie before, and it ends badly !

Summary:   My career as a penny-stock equity analyst gives a unique perspective to the issuer  HMNY is insolvent and the likeli...