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July 24, 2006
Trillium Takes the Reins from Winslow in Managing the Green Century Balanced Fund
    by Bill Baue

The transition in portfolio managers has shifted the fund back to its roots as a core portfolio holding by reducing risk and diversifying holdings across the multi-cap space.


Earlier this year, Green Century Capital Management announced its decision to shift portfolio managers for the $50 million Green Century Balanced Fund (ticker: GCBLX) from Winslow Management Company to Trillium Asset Management. The move represents a re-commitment to the roots of the fund, which was launched in 1992 by state public interest research groups (PIRGs) to serve as a core portfolio holding for investors (and an income source for the PIRGs, with all net profits supporting their advocacy work all along.)

"After ten successful years of managing the Green Century Balanced Fund together, Green Century Capital Management and its sub-advisor, Winslow Management Company, mutually agreed that the two firms were moving in different directions," explained Erin Gray, marketing and strategic analyst for Green Century. "While Winslow was transitioning to focus primarily on equities and particularly small capitalization growth stocks, Green Century wanted to continue managing the Balanced Fund with both multi-cap stocks and bonds."

"We want this to be the kind of fund that investors view as a core offering that can be at the center of their portfolio," added Adam Seitchik, Trillium's chief investment officer and lead portfolio manager of the Green Century fund. "The Fund now has a diversified set of companies across sectors and market capitalization, and the average credit quality of the bond holdings has been increased."

The increased diversification has lowered the fund's risk profile. As of April 30, the fund had higher price/earnings valuations and lower long-term debt/capital measurement than the S&P 1500, the all-cap composite index that serves as the fund's mainstream benchmark, according to Ms. Gray.

However, risk-reduction can result in a hit to financial performance. While the fund flew high under Winslow's riskier strategy, it has come back to earth under Trillium's more conservative management. Fund returns have fallen 0.98 percent year-to-date as of June 30, and one-year returns stand at 2.48 percent. Those returns place the fund in the 98th and 90th percentiles compared to their peer funds (both SRI and non-SRI), according to data provided by Thomson Financial Network. Three-year returns are 7.74 percent, placing the fund in the middle of the pack at the 55th percentile, meaning it outperformed 45 percent of its peers.

The fund's shareowner advocacy got a significant boost with the new sub-advising arrangement, as Winslow advances its environmental commitment through positive and negative screening, while Trillium not only screens but also actively engages companies on environmental issues. Green Century now augments its own strong record on shareowner advocacy with that of Trillium in a close partnership.

"Green Century continues to move forward with its most ambitious shareholder advocacy agenda ever involving dialogue or resolutions with more than 30 high-profile companies in which we ask them to commit to more environmentally sustainable practices," Ms. Gray told SocialFunds.com. Green Century filed resolutions at ConocoPhillips (COP), where over 25 percent of voting shareowners supported ecological protection in the National Petroleum Reserve Alaska, and Amgen (AMGN), where over 75 percent supported political contribution transparency and oversight. "Green Century led several of these advocacy campaigns and worked in conjunction with Trillium among other shareholders and non-profit groups to achieve strong positive results."

As well, the fund continues to advance environmental sustainability through its positive and negative screening.

"We seek to invest in companies demonstrating environmental leadership in their operations and product offerings, including alternative energy, green products, technologies, materials, and infrastructure, organic and natural foods producers, distributors, and retailers, sustainable water solutions, and sustainable development," Dr. Seitchik told SocialFunds.com. "In sectors such as health care and financial services, where environmental impacts are often more indirect, we utilize a best-of-sector approach with respect to environmental leadership, and we also use a set of quantitative and qualitative screens to avoid companies that are doing harm to the environment."

"Given our focus on risk management, the biggest positions in the Fund tend to be larger companies," he added, noting a significant change from the Winslow days.

Examples of companies in the fund's top ten holdings that pass its positive environmental screens include Johnson & Johnson (JNJ) and Johnson Controls (JCI), both of which are taking leadership positions on advancing environmental solutions. In addition to conducting environmental lifecycle reviews for all new products, packaging, and production processes, Johnson & Johnson seeks to significantly reduce pollution with a goal of reducing carbon dioxide emissions to seven percent below 1990 levels by 2010. Johnson & Johnson is also leads the corporate community in commitment to green power, sourcing 18 percent of its energy from renewables such as solar, wind, biodiesel, and landfill methane gas.

Johnson Controls is taking the lead on green building, as it helped develop the US Green Building Council's Leadership in Energy and Environmental Design (LEED) certification standard. Its own Brengle Technology Center was one of the first buildings in the US to earn LEED certification. The company was also a founding partner of the Environmental Protection Agency (EPA) Energy Star Building Program, which promotes and honors energy efficiency.

"We are very pleased with many aspects of our relationship with Trillium, including the depth of environmental and investment research, implementation of investment strategy, extensive coverage of shareholder advocacy issues, and the strength and experience of the portfolio management, compliance, and shareholder advocacy teams," concluded Ms. Gray. "Green Century looks forward to deepening and developing its strong partnership with Trillium."

 

 
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