Jeff Ubben's "Socially Responsible" Inclusive Capital Is Winding Down After Just Three Years

Activist Jeff Ubben in calling it quits with his Inclusive Capital Partners just three years after setting up the firm with a focus on social investing. 

In a memo, he told investors he would be "winding down some funds and returning capital", two people familiar with the matter told Reuters/Yahoo Finance. 

InCap's shutdown reflects the broader struggles hedge funds are facing in attracting new investment. Rates, inflation concerns, and geopolitical instability all played a role in more hedge funds closing than opening last year, the report says. 

The 61 year old former Fidelity employee was the founder of ValueAct Capital in San Francisco and was known as a discreet activist. Ubben preferred working quietly with companies rather than seeking public attention, the report said.

ValueAct, with investments up to $20 billion, took positions in diverse firms, including Microsoft and Martha Stewart Living Omnimedia. Ubben, among other executives, held positions on various corporate boards.

In 2020, after planning a smooth transition at ValueAct and at an age when many consider retirement, Ubben founded InCap. The firm aimed to be an environmental and social impact investor, targeting companies that meet societal needs.

As one of his first high profile investments, Ubben became an investor in electric truck company Nikola, which saw its founder indicted on fraud charges less than 5 years after going public. 

Initially, Ubben aimed to raise up to $10 billion, believing that focusing on environmental and social issues could yield significant returns. As we have written about over the last year, it turns out that ESG investing/clean energy and producing actual returns are like oil and water. 

Recall, we wrote that a year after President Joe Biden's significant climate legislation pledged substantial funding for the U.S.'s transition to clean energy, the sector has seen a sharp $30 billion decline in the value of its stocks over the past six months.

In 2021, InCap invested in Exxon, with Ubben joining its board during a challenging period for the company, marked by a board dispute with Engine No. 1, a new hedge fund.

Recently, InCap announced the sale of two million Exxon shares, valued at $216 million, indicating major portfolio adjustments.

Despite Ubben's respected status, sources say InCap struggled to attract funds, especially as investor preferences shifted, particularly regarding ESG. With last year's market downturn, investors prioritized returns over ESG considerations, the Reuters report said - go figure. 

Eric Scheriff, senior managing director at Capstone, told Bloomberg about ESG investing earlier this week: “We’re in the moment of realization now where some of the euphoria has worn off and we’re starting to realize it’s still not going to be easy.”

“In the final analysis, green investing has to be based on economic realities,” Jerome Dodson, the now-retired founder of Parnassus Investments concluded.

Vaya con dios, Jeff.