From SRI funds, a more sophisticated tack

Now many socially responsible funds rigorously analyze the valuations, the financial data, and the competitive strengths and weaknesses of the companies in which they invest.

Several firms - including Bridgeway, Winslow Green, and Green Cay Asset Management - take the level of investment sophistication even further.

Seeking to reduce portfolio volatility and to generate higher levels of income, the Bridgeway Balanced Fund applies a carefully structured quantitative model to its investing.

According to fund manager Dick Cancelmo, the fund diversifies across a precisely designed mix of growth, value, fixed income, and option strategies.

True to its aim, the fund has shown far less volatility than the market and has beaten the market since its inception almost two years ago.

The Winslow Green hedge fund (a private partnership open only to wealthy investors) and Green Cay Asset Management, a values-based investment firm, have the ability to profit from both rising and falling stocks.

They not only buy stocks; they also "sell short" stocks. Stocks that are "shorted" profit if the stock price declines. Conversely, they lose money if the stock price rises.

"If we believe the work we're doing adds value on the long side by avoiding potential liabilities, shouldn't it also work on the short side?" asks Matt Patsky of the Winslow Green hedge fund. "And shouldn't we be able to make money by being short with the companies we've identified as having a higher probability of both problems and liabilities?"

Jane Siebels, who runs Green Cay Asset Management, tends to run market-neutral fund portfolios - half long, half short.

The long half of the portfolio consists of stocks chosen after careful analysis of the company's financial data, compensation rules, environmental records, code of ethics, corporate governance, and board of directors.

Ms. Siebels also talks with management, employees at many levels of the company, and competitors. Rather than screening out companies with imperfect records, she looks for companies that are improving, and then supports that improvement.

With the short half of the portfolio, she contacts a company's management and explains to them why she is shorting their stock.

"If you go to a company and say, 'I'm not going to invest in you,' basically the response is, 'So what?' But if I go to a company and say, 'I'm shorting you because you have XYZ bad values,' I get immediate attention."

Green Cay funds consistently perform in the top 10 percent of their categories.

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