New Covenant Funds

SRI Funds Get Religious

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SEI Investments Management Corporation (SIMC) is the adviser to the New Covenant Funds which are distributed by SEI Investments Distribution Co (SIDCO). SIMC and SIDCO are wholly owned subsidiaries of SEI Investments Company.

The New Covenant Funds are a family of mutual funds affiliated with the Presbyterian Church. Management believes in rigorous shareholder activism, engaging companies in dialogue about offending policies and regularly filing shareholder resolutions.

Background:

New Covenant Funds are sponsored by the Presbyterian Foundation, which was created by the Presbyterian Church in 1799 and has endowment assets dating back to 1821. In 1999 the Foundation decided to convert its common trust funds to SEC-registered mutual funds, creating the New Covenant Funds. The fund's screen potential investments for gambling, alcohol, and firearms.

Anita Clemons, chief investment officer for the Presbyterian Foundation, was quoted back in 2008 as saying there were about 720 companies in New Covenant Funds’ portfolio and about 100 companies on a restricted list. Of the stocks they held they are active shareholders, aggressively filing and co-filing resolutions.

“The restricted list is where you’ve given up,” she says. “You have no voice left if you don’t own the company. That’s always a last resort for us, to put something on the restricted list. We would rather have a seat at the table and dialogue with the company.”

Previous examples of shareholder activism including filing resolutions with the giant toy maker Mattel asking for reports on product safety, which it agreed to do and with First Energy to prompt the utility to issue a report on climate change. It co-filed a resolution that would have required the energy company ConocoPhillips to set a target on the reduction in the greenhouse gas emissions.

Managers

New Covenant hires external managers such as $2.1 Billion in assets fund manager Coho Partners, via the following announcement made in July 2015 describing their investment selection process:

"Coho Partners deploys a Relative Value Equity Strategy which seeks to create and sustain wealth in the equity markets via an asymmetric pattern of returns over time, where the portfolio has historically demonstrated a down-market capture considerably less than its up-market capture.

Coho believes this objective is achievable and repeatable by populating the portfolio with stocks of what they consider to be high-quality companies that have demonstrated long-term, predictable growth in revenues, earnings, and dividends at reasonable valuations.

Coho’s philosophy is stability-focused: strive to preserve capital in down markets and participate in up markets by investing in companies with historically predictable growth. A broad combination of tools is employed, including quantitative analysis, focused fundamental research and experience. A quantitative proprietary multi-factor screening process identifies quality companies with over $1 billion in market cap. The quantitative process is augmented by the analysts’ experience and qualitative judgment to arrive at an investable universe.

If a particular company is attractive, in-depth fundamental research is completed. Finally, before inclusion in the portfolio, a “Position Paper” is produced outlining various financial and operating metrics which will be monitored to validate assumptions in the valuation model and investment thesis. Stock is sold when fundamentals deviate from the expectations. The sale is executed regardless of valuation because Coho has lost confidence in the potential of that holding. A position may also be sold if the investment team develops a higher conviction in a new stock." 

New Covenant Funds are located in Oaks, PA.