Chet Currier—Socially Responsible Funds Not a Big Market Segment

0

Nothing in the big wide world of mutual funds gets more glittering press notices than “socially responsible” funds.

Reporters love to write about the subject, and promoters of funds managed with social or religious values for instance, barring tobacco or gambling stocks are only too happy to indulge them. From the constant drumbeat that results, you’d think screened funds were taking over the world.

Well, they aren’t. The numbers I’ve checked lately on socially screened funds are really quite modest.

Item: More than a year has passed since the Vanguard Group, the second-largest of all fund firms, announced its first socially screened funds. As of January, John Brennan, Vanguard’s chairman, said they had attracted $70 million, small change indeed in a $575 billion fund group.

“It’s not going to be a major product, we don’t think,” Brennan said in a recent meeting with Bloomberg writers and editors.

Item: The TIAA-CREF Social Choice Equity Fund, also introduced to great fanfare early last year, reported just $39 million in assets by year-end.

Item: The Calvert Group, which bills itself as “the largest family of socially screened mutual funds,” lists assets of $6.7 billion, 18 years after it opened its first fund of that type. That makes it about one ninety-ninth the size of Fidelity Investments’ fund group, the largest of them all.


Investigating claims

Item: After eight years in the product line of one of the world’s biggest full-service brokerage firms, the Salomon Smith Barney Social Awareness Fund had just $361 million in assets at last report from Morningstar Inc.

Please, send me no e-mails questioning my sensitivity. Yes, socially screened funds have won themselves a place in the splendid array of choices available to fund investors.

I have trouble, I must also admit, accepting issue-by-issue systems of judgment used to create a packaged social-values portfolio. What objective way is there to rate a company like, say, Wal-Mart Stores Inc.?

It’s a juggernaut, you may say, that has crushed small specialty retailers everywhere. Perhaps so, but Wal-Mart has also created more than 600,000 jobs since its first store opened in 1962, and its fiercely competitive pricing has saved customers more money than they could count. As with most people and institutions, we’re looking at a complicated creature here, not so simply gauged on a values scale.

Some marketing pitches for socially responsible funds are, shall we say, not so responsible. Look at this from the press release for a new social investing venture: “Investors put more than $2 trillion into investments with some sort of values criteria screening in 1999. In fact, values-based investing is the most popular form of investing, outpacing traditional investing 2-to-1.”


Loose adaptation

The numbers in the release are adapted, if that’s the right word, from a 1999 study by the Social Investment Forum, which declared, “One out of every $8 under management (is) now invested responsibly.” What adverb, I wonder, would this group have us attach to the other $7?

“Value-screened” is a more dispassionate term for this breed than “socially responsible.” But the tone of moral superiority, and the marketing punch that goes with it, would be lost.

Also here on my desk is a Calvert tip sheet for financial planners on the subject “prospecting the religious market.”

“Approaches To This Market,” reads a heading. “Attend services. Enhancing credibility and increasing the chances of attracting new clients are just two of the benefits for some financial planners who start attending services. Of course, you shouldn’t attend services for purely business reasons.”

Chet Currier is a columnist for Bloomberg News.

No posts to display