Financial advisor Eve Ellis, co-founder of the Matterhorn Group at Morgan Stanley in New York City, knows how to think on her feet. She played professional tennis (including doubles at Wimbledon), coached, owned a tennis business and launched and ran a Web company before shifting gears in 2002 to enter wealth management.

So when many clients starting telling her they want to invest with their values and have their portfolios reflect who they are -- a figure she says is now three-quarters -- she not only searched for strategies, she developed two new ones.

In January 2013, Ellis and Matterhorn co-founder Nikolay Djibankov launched the Parity Portfolio, a gender lens investment strategy that invests exclusively in U.S.-based companies that have at least three women on their boards.

Last August, they introduced the Matterhorn Global Sustainability Portfolio, a strategy that invests across seven sustainability themes, including climate change, demand for water, waste-generation issues, global demand for food, improving lives, aging and healthy lifestyles. “It’s really about companies providing solutions to pressing issues,” she says.

Matterhorn also uses other ESG and impact products on the Morgan Stanley platform.

Ellis and Djibankov didn’t rush lightly into the parity strategy. “First and foremost, we know investors want to make money,” she says. “We needed to strike the right balance.” Studies they reviewed convinced them that not only could it be done, it made financial sense.

A 2011 report from nonprofit Catalyst found that Fortune 500 companies with three or more women on the board in at least four out of five years, compared to those with none, generated 46 percent better return on equity, 60 percent better return on invested capital and 84 percent better return on sales. Research from Credit Suisse, McKinsey & Co., Ernst & Young, the Committee for Economic Development and several universities also showed strong correlation, says Ellis.
 
Two versions of the Parity Portfolio utilize Matterhorn’s research and invest in 20 to 30 companies. One of these is a hedged portfolio for clients seeking social returns but less exposure to the markets. The third version offered, the institutional Parity Portfolio, is based on Morgan Stanley Equity Research and includes 40 names.

For its part, Matterhorn conducts fundamental analysis (examining free cash flow, consistency of profitability and valuations) and qualitative analysis (business model, adaptability, management strength and innovation strength).

“It’s really a bottom-up analysis,” says Ellis, but “we’re top-down aware when we get to portfolio construction.” The Parity Portfolio is diverse across sectors and market capitalizations, she notes. Many holdings are in the consumer discretionary and consumer staples sectors. There is also good representation in financial services and technology, she says.

“One male investor in Parity told me, ‘This is the first time I’m not being a passive investor’ -- and he really likes making money,” she says. Parity initially had more male investors but now it’s about even, she adds.

The Matterhorn Global Sustainability Portfolio, which invests in 45 companies, is based upon institutional research at Morgan Stanley. Clients can choose not to be invested in a particular company.
 
The Parity Portfolio is available to Morgan Stanley advisors and Ellis’ goal for 2015 is to have investors in every state. The Matterhorn Global Sustainability Portfolio is offered only to Matterhorn clients but Ellis plans to eventually team with other Morgan Stanley advisors when it has more history.

The minimum for both strategies is $100,000 for investors with relationships with Morgan Stanley.  The minimum for those who are not wealth management clients at Morgan Stanley is $250,000.

Ellis is hesitant to share statistics for either portfolio, given their newness, but she is pleased with performance. And apparently she is confident they have staying power. “Come back to me in five years,” she says. “I’ll give you lots of numbers.”

Meanwhile, the strategies are “really differentiators for us,” she says. Her clients— which include individuals, families, family foundations and nonprofits—are saying,  “You’re giving us a voice,” she says. “Whether they have $8 million or $20 million or $1 million, they’re really not used to having a voice.”