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Thursday, April 18, 2002|
Social Funds Show Strong Results
The Social Investment Forum is touting the performance of socially responsible funds, but the performance message is not yet altering the economics of this fund niche.
The nonprofit trade group points out that 14 of 18 screened funds now receive top ratings from either Morningstar or Lipper. Still, despite the recent performance, these funds have yet to become hot with investors. Only two of the funds tracked by the group have more than $1 billion in assets. Those are the Domini Social index fund ($1.20 billion) and Pax World ($1.17 billion).
The other leaders in the segment are also turning in results that may support a niche effort but are not strong enough to go main stream. Calvert Funds, with a parent company to support its efforts, has only $566 million in its largest fund, according to the group. Chicago-based Ariel, a firm focused on minority investments, has $1.45 billion in its two funds.
Altogether the 46 funds hold $8.44 billion in assets. That leaves the average fund with $183 million in assets, not enough to be profitable at the level diversified asset managers need to support a product. It is also not enough of an asset base to support a mature sales, distribution and marketing effort for the segment.
Yet the average hides even starker problems for the segment. The median assets in these funds are just $51.5 million (half of social funds hold less than this amount).
At that level these funds, with a couple exceptions, remain caught in the "mom-and-pop" stage of business development.
Source: The Social Investment Forum
Objectives Key (Lipper Analytical Services):
AB = Long-Term Bond: Corporate A-rated; Corporate BBB-rated bonds.
BL = Balanced: A balanced portfolio of both stocks and bonds with the primary objective of conserving principle.
EI = Equity Income: Funds that seek high current income and growth of income through investment in equities.
GL = Global Stock: Funds that invest in securities traded outside of the U.S. May own U.S. securities as well.
IB = Intermediate Bond: Investment grade corporate debt (top four grades) with dollar-weighted maturities of five to 10 years.
IL = International: Canadian; International; and International Small Cap.
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