I consider myself an interdenominational mainstream Protestant. The churches I've attended most in the past decade, though, have been Presbyterian. So it was with particular interest that I recently read about the New Covenant mutual fund family.
New Covenant's four mutual funds (with roughly $2 billion in assets under management) are part of the Socially Responsible Investing (SRI) universe. You may think that tells you a lot, but in many ways, it doesn't. Being socially responsible can mean many different things to different people. New Covenant, for its part, takes its SRI inspiration from "Christian principles of the Presbyterian Foundation."
Avoidance and advocacy
There are several ways in which SRI funds operate differently than other funds. For one thing, they often avoid investing in certain industries. For another, they frequently vote to support socially responsible behavior in the companies in which they've invested. Here are some examples from the New Covenant family:
- They completely refrain from investing in the alcohol, tobacco, and gambling industries, and they do so only partially with the defense/weapon industries.
- Through proxy voting and shareholder advocacy, they express their concern over the following issues and support companies doing the "right" (socially responsible) thing: the environment (they focus on environmental stewardship and endorse the CERES principles related to issues of toxic pollution of air, soil, and water, plus global climate change), labor relations (they support maquiladora standards), employment/equality (they advocate strong equal-employment-opportunity programs, pay equity, non-discrimination, and board diversity), animal testing, corporate governance, global warming, genetically modified foods, glass ceilings, health care, human rights, pay disparity, pharmaceutical price restraints, predatory lending, private prisons, and toxins.
Performance
Let's take a closer look at one of their funds -- the New Covenant Growth Fund (FUND:NCGFX). In 2005, it gained about 8.3%, which topped the S&P 500 by 3.4%, which is pretty darn good. In the few years before that, it didn't stray too far from the S&P 500's performance. New Covenant points out that this fund was cited by The Wall Street Journal as one of the top-performing SRI funds.
The minimum investment amount is a mere $500, which is a plus for many investors. The expense ratio (annual fee) is 1.13% -- not too far from average for managed mutual funds. (By comparison, some index funds sport expense ratios below 0.2%.) According to Morningstar data, the fund's top holdings recently included Citigroup (NYSE:C), ExxonMobil (NYSE:XOM), Cigna (NYSE:CI), Time Warner (NYSE:TWX), Waste Management (NYSE:WMI), and McDonald's (NYSE:MCD).
The list above interests me because, as is often the case, I can make arguments against many of the holdings, social-responsibility-wise. Citigroup, for example, has been accused of engaging in predatory lending. Waste Management is being accused -- by Washington, D.C., area workers -- of attempting to reduce the pay of some of the lowest-paid employees and trying to eliminate the current pension plan. Contrary to the wishes of many Americans and Congressional representatives, ExxonMobil supports drilling for oil in the Arctic National Wildlife Refuge. And if you don't like the Playboy channel, know that it's offered by Time Warner Cable. You get the idea by now, I think. Though these and many other firms may do lots of wonderful things, they also seem to do some questionable things. It's hard to find a firm that raises no objections.
Should you buy?
But let's get back to the fund's decent performance. Does it mean you should run out and snap up some shares? You could do much worse things. (One interesting feature of the company's funds is that they permit you to automatically contribute your dividends and/or capital gains to charities.) Of course, since this fund's return in past years hasn't been too far from the S&P 500's return, you might just as well invest in the index fund, especially since its fees are lower. Still, there's merit in investing in an SRI fund such as New Covenant Growth. One chief benefit is sounder sleep at night. If the thought of your mutual fund(s) investing in cigarette purveyors such as Altria Group (NYSE:MO) makes you uneasy, you're a good candidate for SRI investing.
We recommend .
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Learn much more in these Zimmerman articles:
- The Case for Mutual Funds
- Slam-Dunk Mutual Funds
- You're Paying How Much?
- Smart Funds for 2006
- Mutual Fund Supermodels
- All-Star Money Managers
Here's to a happier portfolio! (And hey -- consider forwarding this article to anyone you care about. Just click on the "Email this Page" link near the bottom of the page.)
Selena Maranjian's favorite discussion boards include Book Club , Eclectic Library , and Card & Board Games . She owns shares of Time Warner, a Motley Fool Stock Advisor recommendation. For more about Selena, view her bio and her profile. You might also be interested in these books she has written or co-written: The Motley Fool Money Guide and The Motley Fool Investment Guide for Teens . The Motley Fool is Fools writing for Fools.
