Harcourt Belair (Lux) Sustainable Alternatives SRI Fund: Harcourt Investment Consulting

Most Innovative Fund of Hedge Funds: Winner

Belair (Lux) Sustainable Alternatives SRI Fund provides professional investors with long-term, stable risk adjusted performance from a portfolio of absolute return managers.

The founders of the Belair fund are signatories to the UN Principles for Responsible Investment initiative. Through a combination of customised managed accounts and bilateral agreements, all the underlying managers adhere to a strict and transparent socially responsible investment (SRI) policy.

Harcourt itself was the first hedge fund company to sign up to the UN programme. The Swiss-based firm is determined to open up the hedge fund market to SRI investors.

Its partners in the Belair fund are Folksam, the Swedish insurance group, and the Storebrand Group, an institution in the Nordic market for long term savings and insurance. Folksam's public sector pensions division, KPA Pension, has maintained a strict SRI policy since 1998. Storebrand's policy was introduced in 1995, adding to the collective research capability and 25 years of responsible investing experience the fund brings to the hedge fund market.

The fund itself provides global access to a range of funds and trading strategies with exposure to equities, fixed income and commodity markets. The portfolio is built for long-term capital appreciation and down side protection.

Georg Wessling is the fund manager and also CIO at Harcourt Investment Consulting. "In a world of dramatic demographic changes, increased globalisation, accelerated industrialisation, and resource scarcities the Belair investment proposition is designed to combine a sustainable investment approach with access to hedge fund returns," says Wessling.

The fund aims to match solid underlying research fundamentals with the changing and increasingly tough criteria laid down by socially aware investors.

The fund's investment policy embraces filtering and exclusion, best in class and engagement practices. "The SRI policy has been jointly defined by the founding parties of Belair to correspond to the highest standards of institutional investors' demands," Wessling says.

It capitalises on the new playing rules created by the demographic explosion, urbanisation, the degradation of the environment and global warming. The tougher competition for resources, rising GDP in developing regions and the need for responsible outsourcing are increasingly important themes too.

"Although corporate valuation methods stay the same, future forecast needs to be revised if new challenges are not embraced. Profit maximisation at any cost is no longer viable as firms face increasing reputational risk from important issues such as child labour and environmental negligence," says Wessling.

The investment philosophy reflects the anticipation of global change and the belief that financial markets, though largely efficient, are exposed to episodes of inefficiencies or structural imbalances.

Underlying hedge funds must restrict their exposure to a predefined list of SRI compliant securities. Some 3,000 companies are screened on an ongoing basis, 2,400 are compliant with Harcourt's SRI policy.

The entities must respect human rights, corruption and environment conventions. Those in the tobacco, alcohol, weapons and gambling businesses are excluded. Non-renewable energies and their associated commodities instruments are barred too.

The policy is strictly applied to long and short positions, direct exposure and indirect derivative holdings. Index futures, exchange traded funds (ETFs), baskets and optimised portfolio as listed securities (opals) are allowed provided they do not conflict with the policy.

FUND FACTS: BELAIR (LUX) SUSTAINABLE ALTERNATIVES SRI FUND

Full name of fund: Belair (Lux) Sustainable Alternatives SRI Fund
Name of investment/management company: Harcourt Investment Consulting
Contact: Margaret Gouthier, Stampfenbachstrasse 48, 8006 Zurich, Switzerland (+41 44 365 3025; gouthier@harcourt.ch)
Launch date: November 2007
Assets under management: $326 million
Annualised return: 1.3%
Annualised volatility: 3.3%
Share classes: A/AA (euro), B/BB (US dollar), C/CC (Swiss franc)
Administrator: Citco Fund Services (Luxemburg)
Auditor: PricewaterhouseCoopers
Custodian: Citco Bank Nederland (Luxemburg)
Domicile: Luxemburg
Management fee: 1.00% (institutional classes) 1.50% (retail classes)
Performance fee: 5.00% (institutional classes) 10.00% (retail classes)
Minimum investment: $10 million (institutional classes) $100,000 (retail classes)
Lock-in/up: none
Redemption period: quarterly with 50 days notice