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May 05, 2003
The Switch to Socially Responsible Investing Affords Choice and Confers Power
    by William Baue

The continuation of one investor's story of how he chose SRI mutual funds, and his reflections on the power of socially responsible investing (part two of a two-part article).

Brian P. Fisher recently completely switched his portfolio to socially responsible mutual funds (see part one of this article). By conducting careful research, he was able to create a socially responsible investment (SRI) portfolio that meets his financial and social goals.

"I tried to get a diversified portfolio that mirrored what I had before," Mr. Fisher told "I based my decisions on the fund's longevity, manager profile and tenure, turnover ratio, and expense ratio. Also, I won't go in a loaded fund, but there were enough options of no-load SRI funds that I felt comfortable."

Mr. Fisher investigated which SRI funds best fit his criteria and which did not. A key point for him is the fund's track record. His previous funds were large, well-known names such as the Fidelity Magellan (ticker: FMAGX), the Fidelity Contra Fund (FCNTX), and the Janus Fund (JANSX). All of these funds have existed 15 years or more.

Mr. Fisher chose to invest in the Ariel Appreciation (CAAPX) and the Ariel Fund (ARGFX), "both because they've been around a while and they have excellent performance records," he said. He also chose the Neuberger Berman Socially Responsive Fund (NBSRX) and the Parnassus Equity Income (PRBLX). His final choice was the Pax World Balanced Fund (PAXWX), "the one that's been around since 1971, and that's exactly why I picked it," he said. "For a fund to last that long and yield such performance numbers is amazing. It's my new Magellan."

Mr. Fisher also wanted to avoid paying an arm and a leg to transfer from mainstream to SRI mutual funds.

"I'm in Fidelity, which has this funds network that includes thousands of investment companies," said Mr. Fisher. "There's no transaction fee [NTF] for transferring to a mutual fund included in the Fidelity Funds Network. That was actually another one of my criteria as well: if it was an NTF fund, I would look at it, if it wasn't, I wouldn't."

"But most of the SRI funds were NTF, so I was able to make the switch pain-free and cost free," Mr. Smith added. "There were absolutely zero fees that I incurred."

Mr. Fisher avoided funds with social criteria that he considered too lenient. For example, he decided not to invest in funds that did not have a weapons and military contracting screen. However, he also avoided funds with social and environmental criteria that he considered too stringent.

"I would rather have the criteria be broadly limiting to give the [fund] manager more leeway," he said.

Now that Mr. Fisher has made the commitment to socially responsible investing, he wonders why he didn't align his investments with his values sooner, and has come up with several explanations.

"I thought their screens were going to be more limiting, and therefore that their performance would be much weaker," Mr. Fisher said. "Also, there's very little publicity and documentation in the mainstream about how these funds perform."

Mr. Fisher noted that SRI funds tend not to be on the radar screen of most financial advisors.

"I've worked with investment professionals at all levels, and they've never even asked about my social or environmental priorities," he said. "Aren't those key questions?"

Mr. Fisher also recognizes the value of holding stock in companies that don't reflect SRI values for the specific purpose of conducting shareowner action to effect change.

"Even if we invest in companies whose practices we don't agree with, we can certainly sway them to adopt practices that are socially and environmentally friendly," Mr. Fisher pointed out. "So you do have that power."

"I'll never switch from SRI," Mr. Fisher concluded. "Knowing that there are so many options in SRI funds, I would never invest in a non-SRI fund."

See part one of this article.

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