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Al Gore’s 'sustainable' generation investment beats most hedge funds
Former Democratic vice president and almost-president Al Gore is known as a visionary and a thinker on a grand scale. Gore has remained politically and socially active since the turn of the century, and has spent his time writing several books and championing important environmental issues.
Although not a lot of people are aware, Gore has also been focused on making money since he retired from politics. He and several colleagues founded a firm called Generation Investment Management a little over a decade ago. The asset management firm is focused on, and limits its investments to, businesses that operate on the principles of environmental sustainability.
Gore and his colleagues at Generation describe their goal as the demonstration of a new version of capitalism that will create incentives for financial and business operations to reduce the environmental, social and political damage caused by unsustainable capitalistic excesses. In practical terms, Gore and his Generation partners have made more money using an environmentally conscious model of “sustainable” investing than most fund managers who were seeking profits at almost any environmental or social price.
Keep in mind that this is just the track record of one firm, which has managed assets of relatively modest size for just over a decade. Generation has an AUM of close to $12 billion as of early October, with pension funds and other institutional investors the largest sources of capital, around half based in the U.S and half overseas.
The MSCI World Index reports an overall average growth rate of 7% over the last 12 months. Based on data from Mercer, a UK analytics firm, the average pre-fee return for the global-equity managers it surveys was 7.7%. This meant that after fees (averaging about 70 basis points), the returns brought in by the average professional money manager barely kept up with low-cost passive index funds.
However, Mercer’s data shows that the average return for Generation’s global-equity fund was 12.1 percent a year, which is more than 5% greater than the MSCI index’s growth rate. Among the over200 global-equity managers in Mercer’s survey, Generation’s 10-year average ranked as second.
Gore is not shy about discussing his firm’s success. “I wanted us to start talking when the five-year returns were in, but cooler heads persuaded me that we should wait until now,” he noted
The Generation team is not, however, bragging to try and drum up new business. Gore and the Generation team are rather aiming at a relatively small audience within the financial world that controls the flow of capital, and at the politicians that set the rules for the financial system. “It turns out that in capitalism, the people with the real influence are the ones with capital!,” Gore said in an interview with The Atlantic earlier this year. They hope that Generation’s success will bring attention to the fact that they can make more money if they change their practices to largely avoid the environmental and social damage modern capitalism can do.
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