Hedge Fund Veteran Chris James to Start Impact-Investing Firm

(Bloomberg) -- Chris James, who co-founded one of the biggest technology hedge funds in the early 2000s, is starting a firm to invest in companies that can have a positive impact on society and the environment.

Engine No. 1 will press for change in the public and private companies it invests in, according to a statement Tuesday. A company’s ability to create long-term shareholder value depends on the investments it makes in workers, communities and the environment, the San Francisco-based firm said.

“Framing the debate as ‘shareholder capitalism versus stakeholder capitalism’ does both parties a disservice,” James, 51, said in the statement. “Over the long term, shareholder and stakeholder interests align.”

Impact investments, which are designed to be both socially and financially rewarding, are surging in popularity amid heightened concern about racial and income inequality, as well as climate change. Assets in impact funds swelled to $715 billion at the end of last year from $8 billion in 2012, according to the Global Impact Investing Network. Two Sigma, Allianz SE and Nuveen are among firms with impact-investing groups.

The Business Roundtable, a group of the largest U.S. corporations, last year said it would broaden the beneficiaries of its members’ work to customers, employees, suppliers and communities.

James’s new firm has about $250 million of internal money and plans to raise capital from both retail and institutional investors next year, according to a person with knowledge of the matter. A spokesman for Engine No. 1 declined to comment.

The Team

James has invested in the technology sector for almost three decades. Last year he stepped away from managing client money at the group he founded in 2004, Partner Fund Management, to focus on impact investing. He previously co-founded Andor Capital Management, which was once one of the largest tech hedge funds.

Joining James at the new firm is Charlie Penner, who previously worked at activist hedge fund Jana Partners, most recently leading its impact-investing effort. Jennifer Grancio, who was a senior executive at BlackRock Inc.’s iShares business, is also coming aboard, along with Madeline Hawes, whose advised on early-stage technologies at Google X, according to the statement.

Also joining are Michael O’Leary, who was a founding member of Bain Capital Double Impact and author of “Accountable: The Rise of Citizen Capitalism,” and two employees -- Ed Sun and David Swift -- from James’s former firm.

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