SRI with Chinese characteristics
Socially responsible investment is not something you hear much about when discussing China investments. So it is surprising to hear a Chinese fund manager talking about investing in companies observing good corporate governance. The venture is the brainchild of a star equity analyst turned fund manager for Bank of China International, an offshoot of the asset management joint venture between Bank of China and Merrill Lynch.
Wu Jun, the manager of the Sustainability Growth Equity Fund, explained he hopes people will pick up on the concept. Wu is keen to make it clear the fund is not a green fund and will not be seeking out ‘clean-tech' stocks or for that matter engaging with companies to adopt ethical processes. It's just a growth fund, limited to investing in A shares, denominated in RMB and benefiting hopefully from Wu's stock picking skills. Having been a star securities analyst in the Shanghai market, Wu is now the top rated fund manager in China.
Since it is not immediately apparent why BOCI has chosen to adopt the concept, IPAsia asked Wu Jun why he decided to launch an SRI fund. He said the bank had identified SRI as a new trend, so the fund is really just following a theme. "The investors in this fund are interested in me. They have no real understanding of SRI, but hopefully, if I can make the fund perform well, they will come to realise it is a good thing."
The fund's objective is to provide medium to long term growth from companies ‘displaying characteristics of sustainable growth and development'. He is currently researching 400 of the 1,500 A share market stocks and says he bases the management style on traditional stock selection criteria rather than any overt SRI screening process. Nonetheless, he says he is looking for companies who have a sustainable business model, who demonstrate a good level of corporate governance and attitudes towards social responsibility.
The benchmark is 85% of the MSCI China A shares index and 15% the Shanghai Government Bond index. Equities can be held within a range of 60- 95% of the portfolio, with cash weighting ranging from 5% to 40%. Wu says he will be making use of the ability to raise cash levels at various points.
Wu says that BOCI see themselves as pioneers in China. "We need to educate the China market. Before this fund few people, perhaps nobody, knows about SRI. In China, investment funds are very new and it's difficult for a fund manager, but I like the game."
BOCI has begun marketing the fund to institutions, starting with the insurance companies where Wu is already recognised for his stock picking skill. It is clear that SRI is a secondary consideration for them: "The insurance companies look to invest with key managers. They don't care about SRI."
Commenting on the fund, TBLI Consulting CEO Robert Rubinstein believes SRI is essential to drive as much of China's growth as possible into more energy efficient and sustainable technologies: "Clean-tech and SRI will be absolutely crucial for
China's future development."