Ms Siebels, based in the Bahamas, is one of few hedge fund managers – possibly the only one – to invest according to socially responsible principles.
Not that she hasn’t compromised. “Sometimes we weren’t being hired [to manage money] because we had this values thing going,” says Ms Siebels, who founded her company, Green Cay Asset Management, in 1997 after working as a money manager for 15 years, mostly for Sir John Templeton’s firm, Templeton Galbraith and Hansberger.
So, in a reversal of the usual SRI method, which selects companies according to their social responsibility and then screens them for performance, Ms Siebels’ team selects companies they would like to invest in and then screens them for social responsibility.
The jury is out on whether socially responsible companies provide higher returns but Ms Siebels’ four funds, with $230m spread among them, are clearly outperformers.
Her emerging markets fund, one of few with a five-year record, is up 13.8 per cent since its inception in 1997, against a decline of 26.5 per cent in the MSCI emerging markets index.
The Technology fund, the biggest, and the American Value fund, which invests in small and mid-cap stocks, similarly outperform. A fourth, specialising in hard assets, was added recently.
Green Cay has a core investor base of seven wealthy families who have stayed the course with Ms Siebels. Sir John was a founding investor – he is a neighbour in the Bahamas – and Ms Siebels remains close to him. She often calls on his expertise and that of other investors, even inviting them on company visits.
The group is not afraid to go short – the American Value fund is 40 per cent short – especially on socially irresponsible companies. It tells the company it is shorting it and why, says Ms Siebels. Short positions include Dupont, International Paper, Fannie Mae, Anheuser Busch, Dell, Sprint and Verizon. Green Cay shorted Enron well before its deficiencies became public, after observing in 1999 that Enron “was interested in booking revenue at any cost”, says Ms Siebels. The emerging markets fund was the first to short emerging markets stocks.
On the long side, the strategy is similar. “Take the American Value fund, we include companies with market caps from $100m to $4.5bn, which is 5,000 companies. We eliminate any whose five-year earnings do not reach the five-year government bond return. That takes us to 100 companies”, says Ms Siebels. “Our five analysts go through them and we pick 20 to 30 to concentrate on. We look at whether the company has good values that permeate the company, not just a clean environmental record, and treats employees well. If they have those core values they generally make more money in the long term.”
The Technology fund, which includes private equity investments, kept its head above water by going heavily short in 1999, just before the market top. “Most SRI funds are overweight in tech because they think it’s a clean industry, but if you really delve into tech companies, there was the whole options expensing thing; semi-conductors have terrible emissions; computers have a toxicity problem; IBM has a huge case [class action lawsuit] against it. It’s not as terrific as it seems,” says Ms Siebels.
However, the fund is only 30 per cent short, as she believes there are SRI bargains, especially outside the US. “We have a Singaporean company that is taking used computers, taking out the toxins and recycling. Our biggest holding is Vestel in Turkey, which makes plasma screens and computer monitors. Their emissions were bad, and we talked to management and said you have a wonderful growth plan but you need to address this problem. We shorted them initially, and told them so. They actually changed and now have an incredible emissions record. We put it back in the portfolio last year.”
Ms Siebels sees herself as a stockpicker, not an asset allocator, and emerging markets are a stockpicker’s paradise. “These markets are very emotionally traded so there are always opportunities. Korea two years ago was trading at almost book value, at lower levels than in the Asian crisis,” she says. Favourites include Zee TV, the Indian pay-TV producer, and Bunge, the Argentine spice maker.
By Deborah Brewster, The Financial Times
