Bain Capital to create ESG hedge fund

Long-short strategy launching by October to focus on global consumer, tech, financial and healthcare stocks with $1 billion or more.

Bain Capital is starting a hedge fund to bet on and against companies based on sustainable-investing criteria as part of the alternative asset manager’s roughly $3 billion public-equities business. 

The firm, which already has a private strategy that makes impact investments, expects to launch the fund by October, according to an investor document viewed by Bloomberg. It will focus on consumer, financial, technology and health-care stocks and invest globally in companies with market values exceeding $1 billion. 

The fund will avoid investing in energy-intensive industries, aiming to run a low-carbon portfolio, according to a person familiar with the matter. It will have a daily redemption period and initially charge a management fee of 0.9% and a performance fee of 12.5% — less than the traditional 2-and-20 hedge fund model. 

The public-equities team, led by Chief Investment Officer Joshua Ross, started implementing a sustainable framework into its investment process across strategies in 2018, said the person. Its $1.6 billion global equity long-short fund has delivered an annualized net return of 10% in the four years through July 31, according to the document. The group also runs a global long-only equity strategy with a similar framework.

A spokesman for Boston-based Bain, which manages about $140 billion, declined to comment.

Investment firms are pushing deeper into green strategies as investors funnel capital into the sector to help address climate change and other social issues. On the private-equity side of its business, Bain raised its first impact fund in 2017 and has since backed 13 portfolio companies, according to its website. Its Double Impact strategy had about $1 billion of assets at year-end.

The new sustainable fund will integrate environmental, social and governance considerations into the investment process and assess how these factors will affect companies’ operating margins and earnings power, according to the document. It will aim to back firms that have good management structures, employee relations, compensation and tax compliance.