Bank Creates Novel Social Index Funds
July 12, 1999
A division of U.S. Trust Co. of Boston is managing two socially-conscious index funds that depart from their peers by trying to beat the S&P 500 rather than special indexes filled with socially-screened stocks.
Walden Capital Management of Boston is adviser to the two funds - the Walden/BBT Domestic Social Index Fund and the Walden/BBT International Social Index Fund.
The two funds join, but with a difference, a handful of other socially-responsible index funds on the market. Four socially-conscious index funds already on the market which are offered by Citizens Funds of Portsmouth, N.H. and Domini Funds of New York, for example, are based on their own proprietary indexes, the Citizens Index and the Domini Social Index. The Domestic Social Index Fund, however, tries to match the performance of the Standard & Poor's 500 Index. But, the fund must try to match that performance while excluding stocks from that index that do not meet the fund's social criteria. The International Social Index Fund will try to do the same with the Morgan Stanley Capital International/Europe, Asia and Far East Index.
The two funds have ambitious social agendas. The funds will use shareholder advocacy to "initiate actions that increase the respect shown by companies for human dignity, social welfare and the natural environment," according to a prospectus filed with the SEC. The funds will not invest in companies that make money from tobacco, alcohol, gambling or weapons sales. They will also not invest in companies that are involved in nuclear power production or which have a record of human rights abuses.
Stock selection for the funds is a two-part process, according to the funds' prospectus. First, the funds' adviser will choose stocks from the S&P 500 or the MSCI/EAFE and other stocks that fit their social objective from outside those indexes. Then, the fund managers will choose stocks from those groups that will help the funds best mirror the performance of the S&P 500 or the MSCI/EAFE.