His life and stocks align
Robert Loest applies his daily values to his socially responsible investment fund's portfolio.
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Signs of a company's willingness to change is often more important to Loest than its track record. When Loest has to answer to animal-rights investors for holding companies that test on animals, he offers a rhetorical illustration: "If I'm an animal in a cage in the basement waiting to be experimented on, do I want somebody like me to own the stock if there's some hope that you can have dialogue and improve things? Or do I want somebody just to avoid the stock, screen it out, and go off and polish their halo?"Skip to next paragraph
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That strategy has generated above-average success in today's troubled market. While the fund is down almost 5 percent so far this year, it ranks among the top 5 percent of mid-cap blend funds, according to Morningstar Inc., in Chicago. As of July 15, the fund has produced healthy annualized returns of 10.8 percent over the past five years. Such results put a dent in the notion that applying ethics to a mutual fund limits results for investors.
"People have been kind of skeptical of SRI because they say you're giving up returns, or you're restricting yourself," says David Kathman, a fund analyst for Morningstar, "but I haven't seen any good evidence that socially responsible investing hurts your returns in and of itself. It's much more important who the manager is, what their track record is, what the fees are, and other factors."
Not only has the number of SRI funds grown dramatically since the mid-'90s, says Todd Larsen, media director with The Social Investment Forum, but "there's really no difference in the performance between socially responsible funds and the marketplace of broader funds."
The Integrity Growth & Income Fund, with $40 million in assets, is part of Integrity Mutual Funds Inc., and was started by Loest in 1995 under the name IPS Millennium fund. It is heavy on materials and industrial firms. The fund's largest holding is BHP Billiton, an Australian mining firm.
Loest compares the world today to a post-World War II United States, and consistent with that model, he invests in natural resources and machinery companies that will benefit from a worldwide need for infrastructure development.
As an environmentalist, Loest buys into companies that are developing in the most sustainable ways possible. A few of his alternative energy companies, such as Ocean Power Technologies, are "a gamble on obviously where the world has to go," he says.
Such efforts keep drawing investors. Loest says some don't even know about the fund's ethical management. "They'll call up and say, 'I didn't know this when I bought the fund, but I feel a lot better now that I know this.' "