Socially responsible investment in market downturns : implications for the fiduciary responsibilities of investment fund trustees

This paper investigates whether Socially Responsible Investment (SRI) is more or less sensitive to market downturns than conventional investment, and examines the legal implications for fund managers and trustees. Using a market model methodology, we find that over the past 15 years, the beta risk of SRI, both in Australia and internationally, increased more than that of conventional investment during economic downturns. This implies that companies acting as fund trustees, managed investment schemes and traditional institutional fund managers risk breaching their fiduciary or statutory duties if they go long - or remain long - in SRI funds during market downturns, unless perhaps relevant legislation is reformed. If reform is viewed as desirable, possible reforms could include explicitly overriding the common law to allow all traditional funds to invest in SRI; granting immunity to directors of trustee companies from potential personal liability under sections 197 or 588G et seq of the Corporations Act; allowing companies acting as trustees, managed investment schemes and traditional institutional fund managers and trustees to invest in SRI without triggering a substantial capital gains tax liability through trust resettlement; tax concessions for SRI (eg. introducing a 150% tax deduction or investment allowance for SRI); and allowing SRI sub-funds to obtain “deductible gift recipient” status or the equivalent from relevant taxation authorities. The research is important and original insofar as the assessment of risk in SRIs during market downturns is an area which has hitherto not been subjected to rigorous empirical investigation, despite its serious legal implications.

Should funds invest in socially responsible investments during downturns?

Purpose: This paper investigates whether Socially Responsible Investment (SRI) is less sensitive to market downturns than conventional investments; the legal implications for fund managers and trustees; and possible legislative reforms to allow conventional funds more scope to invest in SRI. ----- ----- Design/methodology/approach: The paper uses the market model to estimate betas over the past 15 years for SRI funds and conventional investment funds during economic downturns, as distinct from during more ‘normal’ (non-recessionary) economic times. ----- ----- Findings: The beta risk of SRI, both in Australia and internationally, increases more than that of conventional investment during economic downturns. Traditional fund managers and trustees in Australia are therefore likely to breach their fiduciary duties if they go long - or remain long - in SRI funds during economic downturns, unless relevant legislation is reformed. ----- ----- Research limitations/implications: The methodology assumes that alpha and beta in the market model are constant. This is the subject of ongoing research. Second, it categorises the state of the market into ‘normal’ economic conditions and downturns using dummy variables. More sophisticated techniques could be used in future research. ----- ----- Practical implications: The current law would prevent conventional funds from investing in SRI. If SRI is viewed as socially desirable, useful legislative reforms could include explicitly overriding the common law to allow conventional funds to invest in SRI; introducing a 150% tax deduction or investment allowance for SRI; and allowing SRI sub-funds to obtain Deductible Gift Recipient status from the Australian Tax Office and other taxation authorities. ----- ----- Originality/value: The accurate assessment of risk in SRIs is an area which, despite its serious legal implications, is yet to be subjected to rigorous empirical investigation. Keywords - SRI, market model, GARCH, trust fund, fiduciary duties, market downturns, Australia.

Restructuring arts and cultural funding in Tanzania : expectations and impasses

In 1984, the Tanzanian government established the Tanzania Culture Trust Fund (TCTF) – well known as ‘Mfuko’ – with the support of the Swedish government. The focus of Mfuko was to enable the arts and cultural sector to strengthen its position through grant allocations. However, rural artists have limited opportunity to access financial support to strengthen their works. The challenge remains: how to restructure arts and cultural funding in line with cutting dependence on foreign aid. This article reports on the research findings of a case study based on ‘Strategies for youth employment in Tanzania: A creative industries approach’. The study was undertaken in Dar-Es-Salaam, Bagamoyo, Dodoma, Lindi and Morogoro from July to October, 2012. This study employed mixed me thods incorporating questionnaires, interviews, and focus groups. This paper argues that lack of deliberate initiatives to restructure arts and cultural funding (in line with cutting dependence on foreign assistance) have prevented artists from fulfilling their desire for better lives. Hence, the severe lack of financial support to the artists remains a challenge to meeting the Millennium Development Goals and Tanzania Development Vision 2025. Although this discussion is specific to Tanzania, the significance and contribution of this case may apply to other developing countries.

A superannuation fund as a buyer?

In Bennett v Stewart McMurdo J considered the operation of a contract where the buyer was described as a superannuation fund. The Bennetts signed a standard REIQ contract as buyers of the Stewarts’ house and land. However, the reference schedule to the contract document contained these words next to the word ‘buyer’: ‘Bennett Superannuation Fund’ The Bennetts wished to enforce the contract. In response, the Stewarts (the sellers) raised two issues: • As the ‘Bennett Superannuation Fund’ was a trust and not a distinct legal entity capable of making a contract, the contract did not specify who was the buyer, so that the contract was void for uncertainty; and • The contract was unenforceable as there was no sufficient note or memorandum for the purposes of s 59 of the Property Law Act 1974 (Qld) as s 59 requires, amongst other things, an identification of the parties. McMurdo J did not accept either of these arguments and made an order for specific performance in favour of the Bennetts. Looking at each issue separately:

A marine reservoir correction for the Houtman-Abrolhos Archipelago, East Indian Ocean, Western Australia

High-precision analysis using accelerator mass spectrometry (AMS) was performed upon known-age Holocene and modern, pre-bomb coral samples to generate a marine reservoir age correction value (ΔR) for the Houtman-Abrolhos Archipelago (28.7°S, 113.8°E) off the Western Australian coast. The mean ΔR value calculated for the Abrolhos Islands, 54 ± 30 yr (1σ) agrees well with regional ΔR values for Leeuwin Current source waters (N-NW Australia-Java) of 60 ± 38. The Abrolhos Islands show little variation with ΔR values of the northwestern and north Australian coast, underlining the dominance of the more equilibrated western Pacific-derived waters of the Leeuwin Current over local upwelling. The Abrolhos Islands ΔR values have remained stable over the last 2896 yr cal BP, being also attributed to the Leeuwin Current and the El Niño Southern Oscillation (ENSO) signal during this period. Expected future trends will be a strengthening of the teleconnection of the Abrolhos Islands to the climatic patterns of the equatorial Pacific via enhanced ENSO and global warming activity strengthening the Leeuwin Current. The possible effect upon the trend of future ΔR values may be to maintain similar values and an increase in stability. However, warming trends of global climate change may cause increasing dissimilarity of ΔR values due to the effects of increasing heat stress upon lower-latitude coral communities.

Monitoring style drift : evidence from U.S. Equity funds

This thesis examines the stewardship and investment style monitoring by managers and boards of U.S. equity funds. Results indicate that complying with a fund’s declared style, especially in value-growth dimension, remains a challenge for fund managers and boards, and that style-based investors should be aware of the risk of style drift since fund managers and boards do not always monitor the fund’s investment style as stated in the prospectus. Results also show that the quality of fund stewardship, as reflected by fund board quality, corporate culture, manager compensation, regulatory history, and fees are effective in ensuring that fund managers and boards perform their fiduciary obligation by increasing monitoring of the fund investment style.

Assessment of body composition in Indian adults: comparison between dual-energy X-ray absorptiometry and isotope dilution technique

Dual-energy X-ray absorptiometry (DXA) and isotope dilution technique have been used as reference methods to validate the estimates of body composition by simple field techniques; however, very few studies have compared these two methods. We compared the estimates of body composition by DXA and isotope dilution (18O) technique in apparently healthy Indian men and women (aged 19–70 years, n 152, 48 % men) with a wide range of BMI (14–40 kg/m2). Isotopic enrichment was assessed by isotope ratio mass spectroscopy. The agreement between the estimates of body composition measured by the two techniques was assessed by the Bland–Altman method. The mean age and BMI were 37 (SD 15) years and 23·3 (SD 5·1) kg/m2, respectively, for men and 37 (SD 14) years and 24·1 (SD 5·8) kg/m2, respectively, for women. The estimates of fat-free mass were higher by about 7 (95 % CI 6, 9) %, those of fat mass were lower by about 21 (95 % CI 218,223) %, and those of body fat percentage (BF%) were lower by about 7·4 (95 % CI 28·2, 26·6) % as obtained by DXA compared with the isotope dilution technique. The Bland–Altman analysis showed wide limits of agreement that indicated poor agreement between the methods. The bias in the estimates of BF% was higher at the lower values of BF%. Thus, the two commonly used reference methods showed substantial differences in the estimates of body composition with wide limits of agreement. As the estimates of body composition are method-dependent, the two methods cannot be used interchangeably