A 'good citizen' tries turning world-beater
Sevgi Ipek needs a vacation.
The manager of the Citizens Global Equity Fund says she has been working 15-hour days seven days a week ever since she was featured in Business Week last December.
The article, along with the fund's recent performance, helped create a groundswell of investor interest.
Her fund now holds more than $350 million dollars in assets. In November, it was at $170 million.
The global fund is one of five offered by Citizens Funds, a Portsmouth, N.H.-based company geared to socially responsible investing.
Citizens uses a series of screens to narrow the investment field. These include avoiding companies involved with alcohol, tobacco, gambling, animal testing, and weapons manufacturing. It also steers clear of firms that break environmental laws, engage in unfair labor practices, or lack diversity on their boards.
Picking companies that pass this screening process has been difficult at times for Ms. Ipek. "It's always frustrating for a portfolio manager, and sometimes I get very upset [when a company is rejected] and I ask 'Why? You cannot do that to me!' But they understand. They put up with me."
Ipek began managing the global fund in 1995, when it held just $9 million in assets. It was a time when "not many people put much faith in socially responsible funds," she says.
The conventional wisdom was that by shrinking the universe of possible investment options, socially responsible funds could not do as well as similar funds without restrictions. That thinking, she says "made me so mad that I had to prove a point."
Point taken: The five-year annualized return of Citizens Global Equity Fund is 32.6 percent, ranking it in the top 10 percent of funds in its category, according to fund- tracker Morningstar Inc. The company gives the fund its highest rating - five stars. This year, it is up 15 percent, and has almost doubled in value from a year ago.
That performance reflects a larger trend.
"Socially responsible funds over the past three years have performed at least as well - as a group - as their nonscreened peers," says Morningstar analyst Emily Hall.
That fact has not been lost on investors. Last year, more than $2.1 trillion in assets were involved in socially and environmentally responsible investing in the US, up from $1.1 trillion in 1997, according to a report by the Social Investment Forum in Washington, D.C.
The increasing interest has been a blessing for Ms. Ipek, who is more at ease today with Citizens' standards. (She says 90 percent of the companies she picks pass the screening process.)
"I have seen a huge change in the mentality of international companies over the past five years," Ipek says. "I have companies coming every day here to see me in my [New York] office. I don't even have to go to them.... The companies come to the US because we have the money and they know that."
Still, Ipek does fly overseas several times a year. Last year, most of her flights went to East Asia, as her fund reaped big gains from the region's economic rebound.
This year, Ipek has turned her sights elsewhere. "There is some very good value emerging out of European stocks," she says. Some 43 percent of the funds portfolio is now in Europe with sizable investments in French multiservice television provider Canal Plus, Italy-based Internet provider Tiscali, and Scandinavian telecommunications companies Ericsson (Sweden) and Nokia (Finland).
The fund also has 27 percent of its investments in US companies - many of them high-tech firms like Cisco, Sun Microsystems, and UnitedGlobalCom.
"Because of their social screens, [socially responsible funds] end up investing more in typical growth sectors of the stock market," including technology, healthcare, retail, and telecommunications, says Morningstar's Ms. Hall. "The companies most likely to get screened out for poor environmental records are old smokestack companies - paper companies, chemical companies, energy firms."
(c) Copyright 2000. The Christian Science Publishing Society