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April 11, 2007
Spectra Green Fund Offers a Different Shade of Green
    by Anne Moore Odell

The Spectra Green Fund, from Fred Alger Management, broadens approach to selecting sustainable and environmentally conscious companies.


With more and more companies thinking about the environment and green technologies, asset manager Fred Alger Management and the Spectra Green Fund, its green mutual fund, are challenging notions about what type of companies and industries green funds should invest in. Spectra Green Fund is pushing for the inclusion of companies across all industries that are seriously committed to making their businesses greener.

New York-based Fred Alger Management added the Spectra Green Fund last year to their family of Spectra mutual funds and opened it up for investors in January 2007. The Spectra Green Fund is a no-load mutual fund that looks for growth companies and uses sustainability and environmental criteria to help chose its portfolio companies.

The fund was launched after the second annual meeting of the Clinton Global Initiative (CGI), which took place September 2006 in New York. President Bill Clinton created the CGI in 2005 as a non-partisan initiative to bring together people across the world to "increase the benefits and reduce the burdens of global interdependence." The Spectra Green Fund works to fulfill one of the main objectives of the 2006 CGI, investing in environmentally sustainable businesses.

The Spectra Green Fundís strategy is to look for growth companies first and then apply its sustainability and green screens. According to Zachary Karabell, executive vice president, chief economist and portfolio manager at Alger, this strategy is different because most green funds apply green screens first.

"We live in the real world, not the ideal world," Karabell told Socialfunds.com. "Increasingly, it looks like there is a correlation between growth companies, innovation, and sustainability. We are focused on companies that are making their supply chain more environmentally friendly or bringing sustainable products to market that fulfill pressing global needs."

As of the end of February 2007, the Spectra Green Fundís top five holdings were Google, GFI Group, On Semiconductor Corp., Dealertrack Holdings, Inc., and Starbucks. Two companies that Spectra Green Fund has invested in that satisfy both their objectives of being growth companies and being sustainable are Suntech Power (STP) and MEMC Electronic (WFR). Suntech Power is a Chinese company that manufactures solar panels. MEMC Electronic produces silicon wafers for use in the solar industry.

Spectra Green Fund is the re-branding of the previously established Alger Socially Responsible Institutional Fund and so although the Spectra Green Fund is less than a year old, there is previous performance data on the fund. As of March 31, 2007, the one-year return is 15.3% and the three-year return is 14.3%.

Karabell acknowledged that the Spectra Green Fund also includes some companies that might not make the cut with traditional SRI or environmental screens, but these companies are reconsidering how profitability and protecting the environment go hand-in-hand. Two examples it offers are BP and Royal Dutch Shell, both of which are considered "most accountable companies" for their reports on their environmental impact (the Spectra Green Fund does not own BP and Royal Dutch Shell currently).

"In the past, green investors have steered clear of resource intensive companies. Yet our world is driven by these companies, many of which are finding new ways of using cleaner fuels, shifting their energy use and changing their carbon-footprints. There is a surprising compatibility between companies making money and also dealing with their environmental impact," Karabell added.

Karabell maintains that Spectra Green Fund has a clear agenda whose managers and analysts think is helping investors make money as they support innovative and far-thinking companies.

Although there are very few strictly green funds currently available, the trend seems to be growing with at least six new funds being launched in 2006. These new funds came from all corners of the globe. US green investors have the new Guinness Atkinson Alternative Energy Fund. In the UK, the Jupiter Green Investment Trust was launched in conjunction with Boston-based Winslow Management. Other newly created green funds are index-based. Tokyo-based Shinko Investment Trust Management launched the Global Warming Prevention Equity Fund based on the Global Climate 100 Index from KLD Research & Analytics. PowerShares launched two index-based exchange traded funds (ETFs): the WilderShares Progressive Energy Portfolio and the PowerShares Cleantech Portfolio.

The Winslow Green Growth Fund launched in 1994 and the New Alternatives Fund started in 1982 have decades-long track records in green investing. The Green Century Funds was launched in 1991 and managed by Green Century Capital Management. Green Century Funds, is entirely owned by non-profit advocacy groups and 100% of its net profits are returned to the advocacy groups. In turn, they use the money to help the environment.

In the past, many green funds have invested heavily in the technology and communication sectors. However, new sectors are opening up to green funds as companies from across the sectors start to rethink their environmental practices.

 

 
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