Company combines growth trends
Social responsibility meets automation
Falcons Rock Investment Counsel LLC, a Germantown consulting firm, has launched a new company that combines socially responsible investing and online automation.
Called Prophecy Impact Investments, the new firm is a play on two investment industry growth trends: the move toward impact investing in companies that are doing good in the world; and the increasing use of so-called robo advisers, which offer online investment advice by using algorithms and little human intervention.
“My idea was to combine the two of them, and to our knowledge we’re only the second firm in the country to do that,” said Greg Wait, president of Falcons Rock and Prophecy’s founder.
Wait started Falcons Rock in 2003 after leaving his job as a senior adviser in the private client services area of the now-defunct Strong Funds. Falcons Rock has 30 institutions and wealthy families as clients and oversees about $900 million of consulting assets, Wait said.
Prophecy’s customers will fill out an online questionnaire about their risk tolerance and time horizon, sign their account documents electronically, and have their money directed to a portfolio that contains a variety of no-load mutual funds.
“The appeal here is going to be that through their investment capital they want to help make the world a little better place,” Wait said.
All of Prophecy’s portfolios
contain funds whose securities selection strategies incorporate Environmental, Social and Governance, or ESG criteria. These criteria measure companies’ sustainability and ethical impact, he said.
The best ESG funds, if well executed, capture superior, risk-adjusted returns, according to a June 2012 study by Deutsche Bank Group’s DB
Climate Change Advisors.
“We believe that ESG analysis should be built into the investment processes of every serious investor, and into the corporate strategy of every company that cares about shareholder value,” Mark Fulton, a managing director, said in a report called “Sustainable Investing: Establishing Long-term Value and Performance.”
Total assets under management in the U.S. that used Sustainable, Responsible and Impact investing criteria topped $8.72 trillion at the start of 2016, an increase of 33% since 2014, according to The Forum for Responsible and Sustainable Investment.
The top 11 robo-adviser firms grew 65% to about $19 billion during the last eight months of 2014, according to a report published by Deloitte in 2015. They represented a fraction of the $25 trillion retail investment industry in the U.S., but this is an area that is growing with the entry into robo advice of big players such as Charles Schwab and Vanguard, the report said.