Hedge fund strategies are good. We all know that. They protect on the downside and they usually provide some uplift when markets are running. But, with the trend to ESG investing, hedge funds are problematic.

According to Philippe Jordan, the president of CFM International, a successful European trend-following hedge fund manager, there are various issues when it comes to applying ESG principles to ethical investing.

“We are in the trading business,” he told the 400-odd people at the AIMA Australia Forum last week, the largest contingent of its kind. “When we have to deal with ESG assets, as a trader, it’s problematic…,” he says. ”It’s probably only the ‘G’ that has a persistent value.”

CFM is a Paris-based quality quant-oriented manager. Jordan is a frequent visitor Australia, and speaker at the AIMA Australia Forum. He said last week, at the Forum, that it was difficult to introduce ESG factors in a trading strategy, such as momentum or trend-driven strategies. By the way, trend-driven strategies actually make a lot of money, over time.

Jordan said: “You tend to get crushed by the factors… But the best news about ESG is t doesn’t take much value away, unless you need to trade. Then it gets in the way.”

He added, though, that people didn’t like passivity. “People want to be involved in their investment decisions.”

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