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December 19, 2002
Presbyterian Funds Honor Their History in SRI by Performing Well in the Present
    by William Baue

New Covenant Funds, which trace its SRI roots back well beyond its 1999 inception date, offers several mutual funds that have been performing better than their peers.


With many stock prices on the decline in the current bear market, diversification as an investment strategy seems wiser than ever. For example, a balanced mutual fund mixes equity and income investments in order to offset stock losses with bond gains. One such fund, the New Covenant Balanced Income Fund (ticker: NCBIX), has fared particularly well recently compared to other funds. As of November 30, 2002, it surpassed 93 percent of all of its peer mutual funds (socially responsible investment funds and mainstream funds alike) in one-year performance, according to statistics from the Thomson Financial Network. Its three-year performance outpaced 91 percent of its peers and it was the top-performing SRI balanced fund for this period with a return of 1.76 percent.

"The Balanced Income Fund is tilted toward bonds as opposed to being tilted toward stocks," said New Covenant Funds Executive Vice President and Chief Investment Officer Dennis J. Murphy. "In this environment, being tilted toward bonds is a positive, as bonds are generating positive returns while stocks are generating negative returns."

Mr. Murphy pointed out that New Covenant actively manages the bond portion of its Balanced Income Fund portfolio, which creates a competitive advantage.

"We're somewhat opportunistic on the bond side, and that creates positive returns," Mr. Murphy told SocialFunds.com. He also stressed that the fund invests in high quality bonds.

New Covenant Funds was established by the Presbyterian Foundation in July 1999. New Covenant Trust Company, a subsidiary of the Presbyterian Foundation, acts as the funds' adviser. Although New Covenant seems young, its history dates back much further.

"Socially responsible investment [SRI] isn't a new concept for us," said Mr. Murphy. "We are part of an organization that has been investing in a socially responsible way for decades-possibly longer than anybody, because we started in the '70s."

"There's a group in the Presbyterian Church called the Mission Responsibility Through Investment, which helped initiate the socially responsible investing concept within the Presbyterian Foundation," added Presbyterian Foundation Senior Vice President of
Marketing Jan Walther.

The Mission Responsibility Through Investment (MRTI) Committee of the Presbyterian Church (U.S.A) continues to play an active role in how New Covenant operates by making recommendations on how to vote shareowner resolutions. The MRTI also files its own resolutions with companies. The MRTI (through the Presbyterian Church) filed or co-filed eleven shareowner resolutions in the 2002 proxy season at companies such as American International Group (AIG) and Delphi (DPH).

New Covenant Funds employs negative screens that exclude companies involved in alcohol, tobacco, and gambling. In accordance with MRTI policy, it selectively divests from weapons manufacturers such as Lockheed Martin (LMT), Northrup-Grumman (NOC), and General Dynamics (GD). New Covenant also screens for human rights by not investing in companies, such as Talisman Energy (TLM), that operate in Sudan. Mr. Murphy said that New Covenant would not re-invest in Talisman, which has recently announced its intention to leave Sudan, until the company's position has been comprehensively reviewed.

In addition to the New Covenant Balanced Income Fund, the firm offers three other mutual funds: the New Covenant Growth Fund (NCGFX), the New Covenant Income Fund (NCICX), and the New Covenant Balanced Growth Fund (NCBGX). The growth fund and the income fund are among the largest SRI funds available. The New Covenant Growth Fund is the fifth largest with $708.6 million in assets, and the New Covenant Income Fund is the seventh largest with $501.1 million in assets.

The New Covenant Income Fund has also been outperforming its peers. It was the top performing SRI bond fund over the three-year period ending November 30, earning a return of 8.36 percent. Over the five-year period, it was the second best performing SRI bond fund, with a return of 6.11 percent.

 

 
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