Social, Religious Funds Have Big Returns

January 2, 2007

Author: Tim Paradis

Source: Las Vegas Sun

Wire Service: AP

NEW YORK (AP) - Wall Street presumably isn't a place where those hoping to mend their ways in the new year might turn for inspiration. But some investors looking to better align their social or religious convictions with their investments have found sizable returns.

Mutual funds that incorporate such principles range from those that invest with an eye toward helping the environment to those that avoid companies that extend health benefits to unwed couples. And while some investors are predisposed to invest in funds whose agendas match their own, even investors who don't necessarily share a fund's beliefs can still find value.

Consider the Amana Funds, which invest according to Islamic principles. The funds avoid companies that sell or promote liquor, pornography, gambling and pork products. In adhering to Islamic law, the funds also exclude companies such as brokerages that make a business of charging or receiving interest or companies that carry excessive debt.

While the restrictions could appear limiting, the funds have flourished. The Amana Trust Income fund, a large-capitalization value fund, saw a return of about 19.3 percent in 2006. The fund, which has assets of about $111 million, carries a five-star rating from Morningstar Inc., which evaluates funds.

Nicholas Kaiser runs the Amana funds, which like many other funds that incorporate social or religious principles, seek outside advice on what types of investments aren't permissible. The funds follow broad recommendations by a group of experts that interprets Islamic law in North America.

While Kaiser notes, for example, that the prohibition on investments within the financial sector could make it harder on the Amana Funds in years when Wall Street favors such stocks, the discipline imposed by the fund has also proven fortuitous.