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March 02, 2004
Piper Jaffray Consulting Division Marries Best Asset Managers with Customized Social Screening
    by William Baue

Socially responsible investment consultant can apply social screens to best asset managers, even if they do not usually practice SRI.

Wanted: Investment consulting firm for high net-worth individuals and institutional investors such as foundations or unions with more than $1 million to put on the table wishing to employ socially responsible investing (SRI). Must be able to create individualized social and environmental screens and apply them to portfolios managed by top performing asset managers--even those who do not usually employ SRI--across all asset classes. Ability to coordinate shareowner action through grassroots organizations also a must.

This is a seemingly difficult wish list to fulfill, yet one that is met by the Philanthropic & Social Investment (PSI) consulting division of Piper Jaffray (ticker: PJC).

"We are very unique in that we have an in-house social research team that has been doing this for a number of years, and that allows us to make any asset manager who's open to the idea of having qualitative screens put on their portfolio to become a 'social' asset manager," said Tom Van Dyck, senior investment management consultant with PSI. "We marry financial performance with social screening."

PSI first identifies clients' values--"not only what values do you want to reflect in your portfolio, but also what do you want to accomplish with the money, what do you want to accomplish with your life?" Mr. Van Dyck told

PSI administers a social questionnaire that focuses on ten distinct areas that help determine both supportive and avoidance screens.

"Do you want to be rigorous on the environment, or do you want best-of-sector, or do you not care about the environment at all?" said Mr. Van Dyck.

"After we do that visioning, we look at financial objectives--the standard stuff you'd see at any consulting firm: risk, return, time frame, income generation required," said Mr. Van Dyck.

This leads to the development of an investment policy statement and an asset allocation strategy. Then, PSI helps clients choose asset managers based on their financial performance, since PSI provides the screens.

"For larger, more sophisticated clients, you have to be able to offer a series of choices of top quartile managers within their asset classes so the overall portfolio performance will compete with, and beat, the benchmarks," said Mr. Van Dyck. "I've never found one firm that has the best asset managers in different asset classes all under one roof."

This problem particularly plagues social investors, who have a limited universe of asset managers to choose from, a problem PSI solves by supplying the screens. PSI also provides regular performance reports and ongoing screening of those managers' portfolios.

PSI also helps investors maintain continuity when performance or other considerations prompt them to shift their assets from one manager to another. For clients with direct relationships with asset managers who have to establish a whole new set of such relationships, "it's a nightmare," according to Mr. Van Dyck.

"With us, clients' entire asset allocation investment policy and plan remain intact--we just sub out that one component that isn't functioning the way it should be and replace it with another," said Mr. Van Dyck.

PSI includes community investing amongst its asset allocations, often utilizing the Calvert Foundation as its conduit, and PSI is exploring hedge fund managers.

PSI often refers clients interested in shareholder action to the As You Sow Foundation, an independent organization founded by Mr. Van Dyck that is not affiliated with Piper Jaffray.

"The client can get as engaged in leveraging their money as much as they want," said Mr. Van Dyck. "In the case of foundations, they can make a grant to Silicon Valley Toxics Coalition and do a shareowner resolution with, say, Dell for example, to do a campaign to increase the recycled content in their computers."

"We coordinate with the grassroots group, we take the foundation's investments in that particular computer company, and we do a shareowner action campaign in dialogue with the company or through a resolution to support what we think is in the best interest of the shareholder and the long-term economic benefit of the company," he added.

One reason why PSI's model works well is that its parent, Piper Jaffray, "walks its talk." Since 1969, Piper Jaffray has been donating five percent of its net earnings before taxes. Piper Jaffray also expenses its stock options, and has a majority of outside versus inside directors.

PSI is seeing success in individualized SRI consulting, raising $100 million in new assets under management last year to bring its total assets under management to about half a billion dollars.


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