Making a Statement

Money: Investing in Gay-Friendly Mutual Funds

For most investors, the goal is simple: Make as much money as possible. How their companies make the money doesn’t really matter, so long as they make a lot of it. But for a growing number of investors, another guiding principle has emerged: values.

These investors want their money to make a statement to the corporate world and, hopefully, promote some policies while punishing others. To serve these investors, Wall Street has created “socially responsible” mutual funds that invest based on certain moral or ethical guidelines.

Once an oddity, socially responsible funds have become a major force in the mutual fund industry. Money invested in socially responsible funds has grown from $40 billion in 1984 to over $2.34 trillion in 2001, according to the Social Investment Forum, a non-profit group that promotes socially responsible mutual funds.

Nearly 200 socially responsible funds cater to almost every type of investor. There are funds for sinners and saints, Muslims and Jews — and, of course, gays and homophobes. Well, maybe not specifically homophobes, but some funds do screen out companies that offer benefits to gay partners.

For gay-friendly investors, a number of mutual funds have emerged over the past decade that screen for companies with policies prohibiting discrimination based on sexual orientation.

Investors looking to promote companies that welcome gays and lesbians should start by checking out Citizens Value. Launched in 1996, the fund was the first to screen companies based on their policies toward gays. Today, the fund has more than $16 million in assets and remains the only mutual fund specifically geared toward gay investors.

In addition, Citizens Value has proved that doing good socially doesn’t means doing bad financially. The fund has outperformed the market over the past five years, growing 5 percent annually compared to 3 percent annual return for the S&P 500.

Besides having an impressive track record, Citizens Value also offers something to investors that almost no other socially responsible fund can match: diversification.


Social Investment Forum
www.socialinvest.org

Gay Financial Network
www.gfn.com


Citizens Value (MYPVX)
800-223-7010
www.efund.com

Domini Social Equity (DSEFX)
(800) 762-6814
www.domini.com

Calvert Social Equity (CSIEX)
(800) 368-2745
www.calvertgroup.com

Dreyfus Third Century (DRTHX)
(800)782-6620
www.dreyfus.com

As its name implies, Citizens Value is “value” fund. Meaning that along with seeking out companies that are gay-friendly, the fund also looks for firms that have recently taken a beating or that are in out-of-favor industries. As a result, these firms have lower prices than companies that are going gangbusters or are involved in the industry du jour. Citizens Value often invests in less-than-glamorous industrial, energy and utility companies. Having these companies in your portfolio provides a nice balance to the types of companies typically found in socially responsible funds. Because most socially responsible funds look only for environmentally-friendly companies that are nice to their employees — i.e., they don’t make them work in dangerous factories — they frequently focus on large technology, telecommunications and financial companies.

That’s right, most socially responsible funds contain a large number of high-tech companies. Of course, that was fine during the late 1990s, when socially responsible funds were tearing up their less-enlightened competition. But three years ago, the bubble popped, sending most socially responsible funds plummeting along other high-tech funds.

But as the market crashed, value funds such as Citizens Value held their own and even increased in price. The lesson was that every portfolio — even those that invest in socially responsible funds — needs to be diversified and that means having a value fund.

Along with Citizens Value, several established socially responsible funds — Domini Social Equity, Calvert Social Equity, and Dreyfus Third Century — also screen out companies with discriminatory practices.

However, these funds have a broader mission than making corporate America more gay-friendly. These funds also screen out companies that promote tobacco and alcohol use or cause pollution.

So if you’re an investor who feels strongly that gay and lesbian workers should be treated fairly but think smoking and drinking are just fine — and perhaps should be promoted — you should stick with Citizens Value.

For those gay-friendly investors who want to put their money directly into specific companies rather than mutual funds, the Gay Financial Network maintains a list of 50 gay-friendly Fortune 500 public companies.

With a buying power estimated at $450 billion, the gay and lesbian community is a potent force in the American economy. If the community directed its investing dollars toward companies with policies prohibiting discrimination based on sexual orientation, you can be sure that corporate American would take notice.

So the next time you think about investing in a company or mutual fund, you might want to look beyond your wallet and consider how your investment could impact the world around you.

Mark Helm is a personal finance writer in Arlington, Va. He can be reached at mhelm@metroweekly.com.


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