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June 22, 2021
12:34 PM EDT
Energy
Engine No. 1 rolls out
$100 mln ETF after Exxon board victory
Svea Herbst-Bayliss
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Traders work on
the floor of the New York Stock Exchange (NYSE) in New York, U.S.,
March 19, 2020. REUTERS/Lucas Jackson |
BOSTON, June 22 (Reuters) - Engine No. 1 is launching an
exchange traded fund (ETF) with $100 million in assets, a bet Main Street
investors want portfolios to back environmental, social and governance
(ESG) proposals on the heels of the hedge fund’s boardroom victory at
ExxonMobil (XOM.N),
company executives said.
Roughly four weeks
after shareholders broadly supported Engine No. 1's call for Exxon to
improve its financial performance and overhaul its clean energy strategy
by electing three of its directors to the oil giant's board, the new firm
is rolling out Transform 500 ETF, whose ticker will be "VOTE". read
more
The new ETF will
invest in the 500 biggest U.S. stocks and track the Morningstar U.S. Large
Cap Select Index. It seeks to differentiate itself from hundreds of
similar portfolios by trying to change corporate behavior through annual
voting on ESG proposals such as climate-related or gender pay equality
issues.
The ETF may also,
from time to time, engage with management directly to push for changes.
Engine No. 1 teamed
up with Betterment, the digital investment advisory company with a network
of 650,000 clients and $30 billion in assets, which will integrate the new
ETF into all of its socially responsible investing strategies.
Until now fighting
corporations to sell off divisions or replace top executives has largely
been limited to activist hedge funds such as Starboard Value or Elliott
Management.
Engine No. 1, which
launched with $250 million in December, is now offering products available
to Main Street and Wall Street investors, tapping into retail investors'
frustration that their main stock portfolios often don't address ESG
concerns.
"We're harnessing
the power of investors in a new way to actually drive impact by how we
vote our shares and work directly with companies," said Michael O'Leary,
managing director of Engine No. 1. The firm expects to create more ETFs.
Part of its allure
will be low fees. VOTE's annual expense ratio will be 0.05%, less than
mutual funds that often charge between 0.5% and 1%. It is also far cheaper
than the average activist hedge fund, which requires a minimum investment
of one million dollars and often charges one-fifth of the profit in fees.
The new ETF will
compete in a crowded field largely dominated by Vanguard, BlackRock and
State Street. The firm hired executives who previously worked at
BlackRock’s iShares business, Bain Capital, and J.P. Morgan among others.
Reporting by
Svea Herbst-Bayliss, Editing by Sherry Jacob-Phillips
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