Retire Rich

May 7, 2007

Fund Investors, You Say You Want a Revolution?

Whether it's protection of their own investments or a sense of responsibility to the world, there is an intriguing, if not unexpected, movement developing among mutual fund investors.

They're raising their voices and asking fund companies to be heard.

As investment firms have long viewed investors as an apathetic group, more interested in the performance of their holdings than any other issue, investors' sudden interest in how funds run their businesses has got to be taking some industry executives by surprise. Smart fund companies will rise to the occasion and view this as an opportunity to gain their audience's loyalty and trust.

There's been evidence of this growing development just within the last month. By announcing it will review conflicts of interest and egregious and hidden fees in 401(k) plans, the Department of Labor is raising investors' awareness of how much they pay fund companies-and how much that can deplete their welfare in their senior years. The DOL said it will work with the Securities and Exchange Commission to figure out a way to better disclose fees and pressure plan sponsors to keep them low.

Then, a labor activist group called CtW Investment Group, the investment arm of the Change to Win federation of labor unions, sent letters to 14 of the nation's largest fund companies, taking them to task for supporting excessive executive pay through their proxies.

On the socially responsible side of the coin, last week, the Save Darfur Coalition launched a national television and print advertising blitz against Fidelity Investments and Berkshire Hathaway. The coalition wants them to divest holdings in companies in Sudan that, it claims, support a government guilty of genocide in the Darfur region. Fidelity's response? It will curtail its investments only if the federal government sanctions it to do so.

Co-Op America, a not-for-profit advocacy group whose slogan is "economic action for a just planet," is urging mutual funds to vote in favor of anti-global warming proxy resolutions. The organization has sent out 10,000 e-mails and letters to the nation's 100 largest mutual fund companies, asking them to "rethink your strategy on climate change issues and take seriously the impact that global warming will have on your funds."

These campaigns aren't quite the mark of a revolution, but they are signs of a more astute and demanding investing public.

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