Politically Correct Profits

07/16/2008 12:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Gordon Pape, editor of Internet Wealth Builder, examines a bond fund he says gives you income and the warm and fuzzy benefits of social responsibility.

There are now more than 50 Socially Responsible Investing (SRI) mutual funds and ETFs available in Canada, and the major players are starting to realize that there is something happening that merits their attention.

Within the past year, three of the major Canadian bank fund groups have launched SRI entries. If you sense a trend here, you're right.

The expanding world of SRI funds gives investors a lot more choice, but it also complicates the selection process since there is no special category for these funds. You have to search them out, and it's not an easy process, although you'll get a lot of help at www.socialinvestment.ca.

We have combed through the list of all available SRI funds and selected our top picks in the most popular categories (limited to those with a track record of at least three years). Here is our top SRI [Canadian] bond fund selection for 2008.

The core strength of Phillips, Hager & North Community Values Bond Fund (PH&N) is its fixed-income management team, and 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 May 31st was 4.59% compared with 4.86% for the Bond Fund and 5.14% for Total Return Bond. That said, this is far and away the best bond fund choice for SR investors. The management fee has just been cut by five basis points, to 0.5%, which will modestly improve returns.

The bottom line: We are impressed with the growing diversity of SRI choices available and by the improved quality we are seeing. It's becoming much easier to invest in a socially responsible way and make decent profits in the process.

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