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December 10, 2002
Citizens Funds Launches Two New SRI Mutual Funds
    by William Baue

Major SRI mutual fund firm marks 20 years in the business by adding two new SRI funds to its family.

Last week, New Hampshire-based Citizens Funds unveiled two new socially responsible investment (SRI) mutual funds to celebrate the twentieth anniversary of its founding. The Citizens Ultra Short Bond Fund and the Citizens Balanced Fund seek to take advantage of market conditions now and in the future.

“The Ultra Short Bond Fund is unique to the SRI environment as it is the only offering in its respective fixed-income category,” said Citizens Product Manager David Budka , “while the Citizens Balanced Fund is a simple way for shareholders to allocate their investments across stocks, bonds, and money market securities.”

The idea of launching new mutual funds during a bear market may seem counterintuitive, but Citizens is banking on the asset growth of SRI mutual funds. SRI mutual funds seem to be bucking the trend of asset shrinkage among mainstream mutual funds. The net inflow to SRI mutual funds grew by 3 percent in the first half of the year as compared to an outflow of 9.5 percent from mainstream mutual funds, according to Lipper data reported by the Social Investment Forum. At the end of the third quarter of this year, the Social Investment Forum stated that SRI funds continued to outpace mainstream mutual funds.

"Citizens has a long-standing tradition of offering socially responsible investment products that have a broad base appeal across the institutional and retail shareholder markets we serve," said Sophia Collier, Citizens Funds President. "These new products are particularly appealing in this volatile market environment, and their launch is a fitting way to commemorate our twenty years in socially responsible investing."

The Citizens Ultra Short Bond Fund is actively managed by Susan Kelly. Ms. Kelly aims to provide a higher yield and return potential than typical money market funds while limiting risk.

“[The fund will] limit risk by investing primarily in fixed-income securities with various maturities, high credit quality, and ample liquidity,” Mr. Budka told “The Citizens Ultra Short Bond Fund seeks a high level of current income consistent with preservation of capital by investing mainly in domestic, short-duration investment-grade securities. During normal market conditions, the portfolio is expected to maintain an average duration of approximately one year or less.”

The Citizens Balanced Fund, which will be managed by Susan Kelly along with Robert Barringer, will be launched later this month. It seeks current income and capital preservation.

“It is a diversified portfolio that provides exposure to equity and fixed-income investments, and offers an avenue to decrease principal volatility in uncertain times, while pursuing long-term growth of capital,” said Mr. Budka. “The focus of the stock portion of the portfolio is on large-capitalization, socially responsible companies. The bond portion of the fund invests primarily in investment grade corporate, agency, and mortgage-backed securities.”

Both funds will employ Citizens’ standard screens.

“We look for companies that protect human rights, have a history of environmental stewardship, and have strong employee and community relations,” said Mr. Budka. “We will avoid companies that are involved in the manufacturing of specific products that we consider harmful or irresponsible, such as alcohol, tobacco products, nuclear power, and weaponry. Nor do we invest in companies that lack diversity on their corporate boards or in their senior management.”

Mr. Budka extrapolated how these screens and other SRI criteria may be fueling institutional and retail investor interest in SRI mutual funds.

“In the long run, we believe that financially strong companies that have good corporate behavior will also have superior financial performance, compared to those that lack corporate responsibility.”


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