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October 03, 2006
New Socially Responsible Investing Portfolios Offer Alternatives to SRI Mutual Funds
    by Bill Baue

Investment advisors can now offer retail clients separate accounts tracking seven different indexes, and a new index is geared toward high net worth individuals with Catholic values.


Socially responsible investing (SRI) is most often associated with mutual funds, but other options are available for aligning investments with personal values. This week sees a significant jump in the number of alternative SRI options, such as separate accounts devised by investment advisors with retail clients or by asset managers for high net worth individuals.

Today, Progressive Asset Management (PAM) launched its Progressive Track Investments (PTI), a series of seven socially screened index-tracking portfolios. And yesterday, Benchmark Asset Managers launched the Benchmark Collaborative Index tracking the S&P 500 while reflecting Catholic values, with research and analytics for the index provided by SRI research firm IW Financial. Benchmark also launched the Catholic Social Values Portfolio, a separate account based on the index.

While there are a number of passive SRI index funds, there are scant passive investing options for investment advisors to steer their retail clients to outside those mutual funds.

"We believe there is a place and a real need for both passive and active management strategies in the SRI world," said Phil Kirshman, director of business development at PAM, a national network of investment advisors specializing in SRI. "For investment advisors who need SRI solutions but are strongly inclined to use passive investing tools, we offer the Progressive Track Investment portfolios as a unique addition to the SRI product landscape."

"In fact, PTI is a solution that fills gaps in that landscape that may have acted as a deterrent for many investment advisors with socially responsible clients," he added.

The seven PTI portfolios cover the spectrum of asset classes, both growth and value for large-, mid-, and small-capitalization companies domestically, as well as the international arena. These portfolios track the S&P/Citigroup 500 Growth and Value Indexes (large-caps), S&P/Citigroup 400 Growth and Value Indexes (mid-caps), and S&P/Citigroup 600 Growth and Value Indexes (small-caps), and the MSCI EAFE Index (international.)

PAM applies the social screens, with total exclusions on tobacco, alcohol, firearms, and nuclear weapons, as well as on companies with known operations with the governments in Sudan and Burma. Less stringent screens apply to companies with meaningful revenues from gambling or significant military-related contracts with the US government. PAM also applies positive screens based on its social ratings on a range of issues, such as environmental responsibility, human rights, diversity, employee relations, product and worker safety, community impact, and corporate governance.

Benchmark applies screens to its Collaborative Index and Catholic Social Values Portfolio, with a strict screen of companies involved in nuclear power and only slightly softer exclusions (five percent of revenues) on alcohol, gambling, tobacco, and military contracting. The index and portfolio avoids companies with poor environmental records, as well as those actively involved in the adult entertainment industry.

What distinguishes this index and portfolio from the PTI products, of course, is the Catholic screening. The index and portfolio will exclude any company that derives revenue from abortion services and products or is involved in stem cell research.

Another distinguishing factor is the clientele. The portfolio is geared toward high net-worth individuals with $3 million or more to invest in it as a separate account. Those with $300,000 or more can invest in a pooled fund.

In addition to witnessing these more alternatives to SRI mutual funds, this week also sees an addition to the canon of SRI funds. Today, Fred Alger Management announced plans to launch the Spectra Green Fund in conjunction with the Clinton Global Initiative. The no-load fund, slated for release before the end of the year or in early 2007, will focus on growth companies contributing to environmental sustainability. It thus joins the spate of other new green funds seeking to capitalize on areas such as renewable energy.

 

 
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