Trustees of Donations

      November 2015

 

     

Episcopal Diocese of Massachusetts

 

 

 

138 Tremont Street

 

Boston, Massachusetts 02111

 

Tel: 617 482 5800

 

 

 

www.trusteesofdonations.org

Dear Treasurer and Members of the Vestry:

                                                    

The climate change resolution adopted by Convention delegates in November 2013 called upon the Trustees of Donations to explore the feasibility of offering a fossil fuel-free Stock Fund alternative to DIT participants.  Following a nation-wide search carried out with the assistance of our investment consultants, Prime, Buchholz and Associates, Aperio Group was selected to provide a customized alternative called Diocesan Fossil Fuel Free Fund. It is being offered alongside our existing Stock Fund and excludes the same gambling, tobacco and coal mining companies that are already excluded from the Stock Fund.  Additionally, however, this new fund screens out companies deriving more than 5% of their revenues from fossil fuel production and allocates 5% of its assets to companies that produce alternative energy, green building, energy efficiency, and pollution prevention technologies.  This Stock Fund alternative is passively managed, with a portfolio optimized to track a custom 85% Russell 3000 / 15% EAFE equity benchmark, a benchmark selected by the Financial Advisory Committee of the Diocesan Council.  Thanks to an $8 million dollar pledge by the Diocesan Council, an expression of its support for the 2013 climate change resolution and of its confidence in this alternative, the Diocesan Fossil Fuel Free Fund became available to DIT participants as an investment option in November 2015.

 

The 58**-basis-point annual fee for investments in the Diocesan Fossil Fuel Free Fund is lower by 22 basis points than the fee for investments in the existing Stock Fund, a reflection of the new fund’s passive management. Access to the Diocesan Fossil Fuel Free Fund will be more restrictive than access to the existing Stock Fund until it achieves an economy of scale. Unlike the existing Stock Fund, which allows for month-end withdrawals with one day’s advance notice, the Diocesan Fossil Fuel Free Fund allows investors to withdraw money only on a quarterly basis and on condition that they provide the Trustees of Donations with instructions no later than ten business days prior to quarter end.  Standing instructions for quarterly distributions of fixed dollar amounts are accepted. The minimum for an initial investment in the fund is $50,000* and the minimum for additional investments is $20,000.

 

If, after reviewing the material below, your parish wishes to transfer existing Stock Fund assets into the Diocesan Fossil Fuel Free Fund, please mail a signed letter of instruction to our Investment Coordinator, Mr. Charlie Jordan, using the above address or scan and email it to cjordan@diomass.org. New investments will, of course, be welcome.

 

Participants should keep in mind that the Diocesan Fossil Fuel Free Fund has been created to address a moral concern and that its returns will be affected (for better or worse) by the absence of investments in most of the Energy sector, a sector whose stocks comprise a large segment of the investable universe. In addition to our own Diocese’s decision to invest a portion of its assets in this new fund, you should also be aware that the National Church has voted to divest its endowment from fossil fuels. While as trustees, we are legally required to make recommendations based on investment merit alone (a constraint that prevents us from investing trust fund assets in this new fund), we are pleased to offer this Stock Fund alternative to agency fund participants who wish to direct a portion, or all, of their Stock Fund investments to it.

 

Thank you for your careful consideration of this offering and the material below. We look forward to hearing from you.

 

Sincerely,

      Jonathan Treat                             Elizabeth Westvold

         Jonathan Treat                                                Elizabeth Westvold

          President                Vice-President & Investment Committee Chair

 

 

 

*In May 2019, the minimum initial investment was reduced from $50,000 to $25,000.

 

**Effective January 1, 2021, the annual fees charged for the Diocesan Fossil Fuel Free Fund was reduced from 58 basis points to 47 basis points.

 

     

Fossil Fuel Free Fund Highlights

        Customized Portfolio & Screening

  -      Passively managed by Aperio

   Proxy voting done in accordance with SRI policy

  -     Screens out companies deriving more than 5% of their revenues from fossil fuel free production

  -  Allocates 5% of its assets to companies that produce alternative energy, green building, energy efficiency, and   pollution prevention technologies

  -      In addition to gambling and tobacco, the fund excludes fossil fuel producers within the following categories:

o   Oil, Gas & Consumable Fuels*

o   Coal Companies**

o   Fracking***

o   Tar Sands****

o   Carbon Underground 200™*****

See "Explanation of Fossil Fuel Divestment Options" section below for further details.

      Customized Benchmark

-      Portfolio optimized to track a custom 85% Russell 3000 / 15% MSCI EAFE equity benchmark, a benchmark selected by the Financial Advisory Committee of Diocesan Council

-      Benchmark includes companies within certain industries which have been screened out of the portfolio (e.g. fossil fuel producers, tobacco, gambling)

      Fees

-      Expenses for combined management, custody, accounting, and administrative services are 0.58% annually

      Investing in the Fossil Fuel Free Fund

     -     The minimum for an initial contribution is $25,000 and the minimum for additional contributions is $20,000.

-     Withdrawals can be made on a quarterly basis with 10 business days advance notice prior to quarter end.

 

  
Explantion of Fossil Fuel Divestment Options

 

*Oil, Gas & Consumable Fuels - excludes companies defined within the Global Industry Classification Standards (GICS) industry of Oil, Gas & Consumable Fuels. This option includes coal companies but does not include Oil & Gas Drilling nor Oil & Gas Equipment & Services.

**Coal Companies - excludes companies defined within the GICS sub-industry of Coal and Consumable Fuels. This exclusion only addresses the production of coal, it does NOT include coal-powered utilities.

***Fracking - excludes companies known to be involved in hydraulic fracturing as a method for recovering oil and natural gas. Examples of fracking companies include Anadarko Petroleum Corp and Apache Corp.

****Tar Sands - excludes companies identified by non-governmental organizations (NGOs) such as the Rain Forest Action Network as having tar sands operations. Examples of tar sands companies include Chevron and ConocoPhillips.

*****Carbon Underground 200™ - excludes The Carbon Underground 200™, a list composed of the top 100 public coal companies and the top 100 public oil and gas companies globally, ranked by the potential carbon emissions content of the their reported reserves. The companies in this set, some of which are multi-industry conglomerates with subsidiaries in the fossil fuel industry, represent the following industries: Consumer Discretionary, Consumer Staples, Energy, Industrials, Materials, and Utilities. NOTE: The Underground 200™ exclusions leave in smaller companies in these industries. In seeking to minimize tracking error, the optimizer will include smaller companies from the same sectors/industries. If your goal is to avoid the largest companies in this area, the Underground 200™ is a good choice; if your goal is to avoid the entire industry, consider excluding both the Underground 200™ and the Oil, Gas & Consumable Fuels industry.
 

   

aperio Firm Profile

Aperio's consultative approach is designed to bring clarity, experience, and comprehensive investment management through a disciplined yet flexible approach to indexing. They specialize in three practice areas: Active Tax Management, Factor Tilts, and Socially Responsible Indexing/ESG. With their depth of expertise, we design and manage portfolios that reflect a client's preferred risk profile and values while controlling tax costs and fees. Active Tax Management, Factor Tilts, and Socially Responsive Indexing can be used in complement or individually.

In August 2018, Golden Gate Capital, a leading private equity firm, acquired a majority equity interest stake in Aperio. Aperio continues to be led by its founders, Patrick Geddes, Chief Executive Officer and Chief Tax Economist, and Paul Solli, Chief Marketing and Strategy Officer.

aperio Assets Under Management – December 31, 2018

Total Assets Under Management: $24.7 billion
- Active Tax Management: $21.3 billion

- Total SRI Assets: $6.1 billion
- Total Factor Tilts Assets: $7.5 billion

aperio Leadership Team

Partners

Patrick Geddes is Aperio's Chief Executive Officer and Chief Tax Economist. Prior to joining Aperio, Patrick was the Chief Financial Officer of Morningstar, Inc. Patrick also served on the company's executive committee, overseeing all strategic, policy, and internal investment decisions. Prior to being named CFO, Patrick served as Morningstar's Director of Quantitative Research. Before Morningstar, he spent five years providing quantitative analysis, currency hedging, and corporate tax optimization to Amoco, now part of BP, in the U.S. and Europe. At Amoco, Patrick was part of a group that modeled the nuances of highly complex international tax structures as part of the company’s efforts to manage taxes as effectively as possible, which in the energy sector can provide enormous payoffs to the bottom line and shareholders. He has taught numerous courses in graduate-level finance at the University of California Berkeley Extension. Patrick received his MBA, with Honors, from the University of Chicago. With Apeiro co-authors Lisa Goldberg and Ran Lesham, Patrick was awarded a Harry M. Markowitz Special Distinction Award by the Journal of Investment Management for "Restoring Value to Minimum Variance" in 2014.

Robert L. Newman, CFA is Aperio's Chief Client Experience Officer. Before joining Aperio, he was Director of BARRA Ventures at BARRA. Prior to BARRA, Bob was Vice President of Salomon Brothers Investment Strategies group, where he managed the group's services to index managers. Before that, Bob was a portfolio manager for the Harris Bank in Chicago, where he was in charge of fixed-income portfolio strategy and credit, during which time institutional assets under management grew from $500 million to $4 billion. Bob currently serves on the Investment Committee of the Jewish Home Foundation of San Francisco and Chairman of its Investment Committee. He formerly served on the board of the Jewish Community Federation of San Francisco. Bob is a Chartered Financial Analyst and earned his MBA in Finance and Investments from New York University.

Paul O. Solli is Aperio's Chief Marketing and Strategy Officer and head of product development. He began his career as a CPA with Peat, Marwick, Mitchell & Company in Boston and also worked in strategy consulting for Bain & Company. Prior to Aperio, Paul was Vice President of Salomon Brothers Investment Strategies group, responsible for structuring portfolios and advising pension funds and investment companies. While at Salomon Brothers, Paul also provided consulting and order-execution services to the firm's largest indexers. He received his MBA from the Tuck School at Dartmouth College.

Portfolio Management & Research

Mark Bateman
is an Aperio's Director of ESG/SRI Research. He is an internationally recognized ESG/SRI Impact expert and works with with Aperio's clients to create customized ESG/SRI/Impact solutions that reflect their values. In addition to his work with Aperio, Mark is the founder of ENSOGO Analytics, a firm offering environmental, social, and governance (ESG) ratings of mutual funds and ETFs. Before founding ENSOGO, he served as the Director of Research at IW Financial (now part of ISS), a leading provider of value-added ESG research. Prior to that, Mark spent eleven years at the Investor Responsibility Research Center (IRRCi, now part of MSCI) in Washington, DC in a range of positions, including Director of the Environmental Information Service and ultimately Vice President of Research and Operations. He also served on the original steering committee of the Global Reporting Initiative, helping to develop a sustainability reporting framework for companies. He serves on the board of directors for the Sustainable Investment Institute (Si2), a social proxy research firm. Mark holds a BA from The Johns Hopkins University and an MA from George Washington University.

Lisa Goldberg is Aperio's Director of Research. She has a joint appointment in Statistics and Economics at the University of California, Berkeley, where she serves as Co-Director of the Consortium for Data Analytics in Risk (CDAR). Prior to joining Aperio, Lisa was an Executive Director of Research at MSCI where she oversaw research supporting pension funds, endowments, and sovereign wealth funds, with an emphasis on risk due to extreme events, asset allocation, and credit. She has held academic positions at City University of New York, the Institute for Advanced Study, l’Institut des Hautes Études Scientifiques, and the Mathematical Sciences Research Institute, and she was a Sloan Fellow from 1987 to 1990. Lisa holds a BA in Mathematics from Brandeis University. She serves on the editorial board of the Financial Analysts Journal, and she is an expert judge for the Haas Business School’s Moskowitz Prize for Socially Responsible Investing. She is the co-author of a book, Portfolio Risk Analysis, and more than 40 articles on mathematics and quantitative finance in peer-reviewed journals. Lisa, with co-authors Robert Anderson and Stephen Bianchi, was awarded a Graham and Dodd Scroll Award for Excellence by the Financial Analysts Journal for "Will My Risk Parity Strategy Outperform?" in 2012. With Aperio co-authors Ran Leshem and Patrick Geddes, Lisa was awarded a Harry M. Markowitz Special Distinction Award by the Journal of Investment Management for "Restoring Value to Minimum Variance" in 2014.

Ran Leshem is Aperio's Chief Investment Officer, overseeing portfolio management, portfolio accounting, and performance reporting. He has extensive expertise in applying quantitative techniques and information technology to operational problems, and is in charge of scaling the portfolio management process and portfolio management research. Ran also works closely with clients in a consultative capacity to create customized solutions that best align with their investment objectives. Prior to joining Aperio, Ran was a manager in Operating Strategy at the GAP, Inc. He received his bachelor's degree in Mathematics from the University of Waterloo, Canada, where he received the Hewlett Packard Award for academic excellence, and his MBA from the University of California, Berkeley. With Aperio co-authors Lisa Goldberg and Patrick Geddes, Ran was awarded a Harry M. Markowitz Distinction Award by the Journal of Investment Management in 2016. Along with Lisa Goldberg and Michael Branch, he wrote "Factoring Profitability," published in Risk-Based and Factor Investing in 2015.

Robert Tymoczko is Aperio's Director of Portfolio Management. He is responsible for overseeing the portfolio management, research, and strategy implementation of all investment products. Prior to joining Aperio, Robert was a managing partner at AlphaStream Capital Management, LLC, where he was responsible for quantitative research and portfolio management. Before AlphaStream, Robert was Lead Portfolio Manager and co-head of U.S. quantitative equity products at Zurich Scudder Investments. Robert received a BA in Quantitative Economics from Stanford University and his MBA with concentrations in finance and econometrics from the University of Chicago.

Chief of Staff

Liz Michaels is Aperio Group's Chief of Staff and Director of ESG/SRI. Prior to joining Aperio, Liz was responsible for the $11 billion defined contribution managed accounts business at Ibbotson Associates, a wholly-owned subsidiary of Morningstar, Inc. Earlier in her career, Liz was the Chief Operating Officer of Morningstar, Inc. and served on the company's executive committee. Liz was also the President of Jellyvision, Inc., an interactive firm best known for its game, You Don't Know Jack™ and Associate Dean/Director of the Career Advising and Planning Services office at the University of Chicago. Liz has a BA in Economics and an MBA from the University of Chicago.

Business Development & Client Experience

Ken Lassner, CFA is a Senior Client Relationship Manager. In that role, he oversees the firm's efforts in the Eastern US. He has over 20 years of experience in the financial services industry. Before joining Aperio, Ken worked at US Trust and Columbia Management as a Senior Product Specialist, focusing on providing tax efficient equity solutions to high-net-worth clients and wealth advisors. Prior to that, he was a Product Specialist for Deutsche Asset Management in the Advanced Research and Quantitative Strategies Group and an Investment Strategist at JP Morgan Investment Management, Inc. Ken also spent nine years as a plan sponsor for the Federal Reserve and the Interpublic Group of Companies, managing pension plan assets. Ken earned a BS in Finance from Babson College and an MBA in Finance and Investments from Bernard M. Baruch College. He holds the Chartered Financial Analyst (CFA) designation and is a member of the New York Society of Securities Analysts, serving as Vice Chair of its Sustainable Investment Committee. Ken also has a series 7 license (inactive).

Katie Salvaterra is a Operations and Client Service Manager at Aperio. In that capacity, she is responsible for managing client relationships, streamlining business development and client service processes and workflows, and identifying strategic business opportunities. Since joining Aperio in 2008, Katie served in various operations, client service, and senior management roles at the firm before assuming her current position. Previously, she was a Client Service Representative at Quantum Capital Management LLC. Katie received her BA from the State University of New York (SUNY) College at Brockport and an MBA in International Management from the Middlebury Institute of International Studies at Monterey.