TORONTO (GlobeinvestorGOLD) --More fund companies are jumping on the SRI (socially-responsible investing) bandwagon. That's great news if you're a "green" investor because it provides more options from which to choose. But it also makes it more difficult to identify the best SRI funds, especially since there is no specific category devoted to them.
Last week, I wrote about my top Canadian equity SRI picks. Now here are some of the best selections in other categories.
Top global fund
Mackenzie Universal Sustainable Opportunities Class. This is Mackenzie Financial's nod to socially-responsible investing. Unfortunately, it seems to have become lost in the huge Mackenzie line-up and has only attracted $28.5-million in assets since it was launched in May 2002. That's too bad because those few investors who did get on board have been doing much better than most in a tough global marketplace. Although the fund lost 12.4 per cent in the year to June 30, that was much better than the category average (-14.6 per cent). The three-year average annual compound rate of return of 6 per cent was comfortably above the norm for the Global Equity category.
Mackenzie says that only companies that pass "the twin hurdles of fundamental financial strength and acceptable social behaviour" are eligible to be considered for this fund, which can invest in all parts of the world. To qualify for consideration, companies must "encourage progressive industrial relations with employees; encourage equal opportunities within their business operations and environment and within the countries in which they operate or do business; do not derive a significant portion of income from tobacco or alcohol sales, pornography or gaming products; provide products or services which are designed primarily for civilian use and are not military in character; are energy or utility companies which provide energy from non-nuclear sources and which minimize pollutants from their use of fossil fuels; consistently strive to comply with environmental regulations established by governments and government agencies; are committed to implementing environmentally conscious practices."
Europe (including Britain) accounts for more than 50 per cent of the asset mix while the United States weighs in at 14 per cent. About 21 per cent of the assets are in financial stocks (e.g. Zurich Financial Services) while the fund is very light on energy (9.7 per cent), which helps to explain the latest one-year loss.
This fund has emerged as a fine choice for socially-responsible investors and by investing here you also help the underprivileged since .05 per cent of the asset base is donated annually to the Mackenzie Charitable Foundation.
Top income fund
Ethical Monthly Income Fund. It seems as though everyone is launching monthly income funds so why should the Ethical group be any different? This one began in 2004 and so far it has turned in some impressive results under the leadership of venerable money manager John Priestman of Guardian Capital. Since he is an income trusts specialist, it should come as no surprise that trust units make up the largest block of assets in this fund at 45 per cent. About one-third of the portfolio is held in bonds, with 21 per cent in Canadian stocks and the rest sprinkled around.
Over the three years to June 30, the fund produced an average annual compound rate of return of 6.8 per cent, comfortably ahead of the 5.5-per-cent average for the Canadian Neutral Balanced category. The latest one-year gain was only 1.5 per cent but that doesn't look so bad when you consider that the average fund in this group lost 1.4 per cent. Monthly distributions are currently 4 cents a unit and I'm pleased to see that the fund's net asset value (NAV) has risen since the start of 2008, despite the pay-outs.
Top balanced fund
Acuity Social Values Balanced Fund. This is the old Acuity Clean Environment Balanced Fund with a new, more inclusive name. The stated objective of this fund is "to provide a prudent balance between long-term capital appreciation and income" while using socially-responsible screens to select securities. Don't get too hung up on the income side of this equation, however. Apart from a year-end capital gains distribution, which will vary significantly, cash flow is minimal.
Apart from that quibble, this has developed into a decent balanced fund in recent years. The five-year average annual compound rate of return to June 30 was an impressive 11.7 per cent, more than three percentage points ahead of the category average. The portfolio is divided 62 per cent-38 per cent in terms of stocks versus bonds/cash and most, but not all, of the equities are of the blue-chip variety. It's worth noting, however, that more than half the equity portion of the portfolio is invested in resource stocks, including major oil sands producers like Suncor. That might not sit well with some SRI investors.
Top bond fund
Phillips Hager & North Community Values Bond Fund. The core strength of PH&N is its fixed-income management team so it should come as no surprise that this fund has been a first category performer in every calendar year but one since its launch in late 2002. The difference between this and the company's other bond funds is a restriction on investing only in securities issued by the Canadian governments and corporations "that conduct themselves in a socially responsible manner."
Those restraints may be the reason why this fund, although it has turned in an above-average performance, has not done as well as the company's Bond Fund or Total Return Bond Fund. The five-year average annual compound rate of return to June 30 was 4.51 per cent compared to 4.76 per cent for the Bond Fund and 5.02 per cent for Total Return Bond. That said, this is far and away the best bond fund choice for SRI investors. The management fee has just been cut by five basis points, to 0.5 per cent, which will modestly improve returns.
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