Wall Street Fighters, Do-Gooders -- And Sting -- Converge in New Jana Fund

A big activist investor is enlisting help from social activists and rock star Sting to raise billions of dollars and target companies they think should be better corporate citizens, in a convergence of Wall Street's roughest fighters and its do-gooders.

Jana Partners LLC plans to launch a new fund this year dubbed Jana Impact Capital to invest in companies the hedge fund believes are good bets but could do better for the world. The fund's board of advisers includes Sting and others who have a track record of pressuring companies on environmental, social and governance issues.

Socially responsible investing, long the territory of smaller gadflies, has grown in popularity in recent years. The presence of Jana -- one of the most well-known activists on Wall Street -- boosted by Sting is expected to lend even more legitimacy to the idea.

Setting the table as it unveils its plans for the fund, Jana has chosen an eye-catching first endeavor -- the world's biggest stock, Apple Inc. Jana is partnering with union giant California Teachers' Retirement System, or Calstrs, to push Apple to address concerns about teenage iPhone addiction, calling it a potential crisis that the company needs to respond to in order to protect its business.

Jana isn't the first fund to pair with a celebrity icon to try to bring about responsible change. TPG partnered with its own rock star, U2's Bono, and raised $325 million last summer for its Rise Fund, with the help of UBS AG's wealth-management unit. In 2004, Al Gore teamed with David Blood, a former Goldman Sachs Group Inc. executive, to start Generation Investment Management, which today manages more than $17 billion.

Most of those funds, and other options like exchange-traded funds aimed at retail investors, invest in businesses they think will further positive change, while avoiding industries and companies they believe are harmful.

Activist investors including Blue Harbour Group LP and Trian Fund Management LP have recently said they view social and governance problems as risks to investments, similar to the position taken by major index funds like BlackRock Inc. and Vanguard Group.

But the work of actively badgering companies to act better, or buying into stocks purely to make changes based on social impact, has historically been outside the mainstream on Wall Street.

Few of Wall Street's big activists have believed that social improvements alone will actually boost a stock and make them money. Research on the impact is mixed: Some studies have shown companies with good social, environmental and governance scores perform better, but causation remains hotly debated.

Jana believes, with the help of other investors, it can catalyze socially-conscious changes in companies to create value for stockholders. Still, it won't seek to charge the kind of high fees the hedge-fund industry is known for, which usually come with the chance for outsize returns.

"We still plan on finding good investments, but they will also be companies that can enhance and protect long-term value by focusing on the well-being of the public, our economy and our society, all of which are inextricably linked with long-term returns," said Charles Penner, a Jana partner involved with the new fund.

Outside the Impact fund, Jana will continue to do the kind of activism it is best known for, such as breaking up companies, pushing for board changes or driving sales. Those types of moves have long been criticized for helping stocks in the immediate term at the expense of the future -- one reason the new fund may surprise some.

The fund's board of advisers will include Sting and his wife, Trudie Styler, who started the Rainforest Foundation in 1989. Sister Patricia A. Daly, a nun who successfully fought Exxon Mobil Corp. over environmental disclosures, and Robert Eccles, an expert in sustainable investing, are also on board.

Mr. Eccles, who was the first chairman of the nonprofit Sustainability Accounting Standards Board, which pushes companies to disclose and discuss plans and potential issues, said his initial reaction to Jana was surprise.

"This is like counter-intuitive, if not an outright oxymoron, that an activist hedge fund is going to raise a sustainable investment fund," he said.

But he quickly came around to Jana's seriousness, he said, and believes the fund could be a "sea change" for the industry.

Write to David Benoit at david.benoit@wsj.com

(END) Dow Jones Newswires

January 07, 2018 16:17 ET (21:17 GMT)