WSJ Spotlights Mutual Fund Do-Gooders
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Tuesday, December 08, 2009

WSJ Spotlights Mutual Fund Do-Gooders

The media has paid a great deal of attention lately to the darker side of finance and so an article in the Wall Street Journal's Investing in Funds special section, which examines mutual funds that donate a portion of their profits to charities, is a welcome change of tune.

Model-citizen funds highlighted include American Century Investments, which gives 40 percent of its after-tax profits to the Stowers Institute for Medical Research, which takes aim at curing genetic and life-threatening diseases and was founded by ACI's founder and his wife. In addition, the firm's portfolio includes nine LiveStrong target-date funds which make contributions to cancer research.

Other firms sharing the spotlight are Cobleskill, New York-based Fenimore Asset Management, which donates 10 percent of its pre-tax profit to charities, mostly local, selected by a committee of its employees and executives, and Houston-based Bridgeway Capital Management Inc. – a firm that gives 50 percent of its after-tax profits to the Bridgeway Foundation, which disperses the money among organizations that tackle education issues, poverty, and human rights. Wayland, Massachusetts-based Davlin Fund Advisors also garners mention for its hand-on approach of including in the fund's expenses a charge equal to 0.5 percent of assets that is directed to charities picked by the fund's investors.

“I think it just sort of reinforces the type of image that they wanted to convey – that the company is a good corporate citizen,” states Dave Pollitzer, president and chief operating officer of Fenimore Asset Management.

While the means and methods by which different funds make contributions can vary widely, the caveat critics say, concerns funds' fees. Specifically, Jacob Gold, a wealth adviser in Scottsdale, Arizona warns investors that if you compare two mutual funds with equal expense ratios but one is contributing to charity, “I think it's very admirable.” However, if a fund charges a higher fee and is giving to charity, “I feel it's more of a marketing ploy than goodwill.”

“Look at it this way,” states Russell Kinnel, director of mutual-fund research at Morningstar Inc., “If two funds charge the same expense ratio, one manager might give money to charity, while the other uses it to buy a large yacht.”

Still, many of these funds represent an opportunity for people to make a contribution to society and common good causes through their investments, which is one cause many people can get behind.

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