A group of doctors at Harvard Medical School are saying that many of the largest mutual fund companies in the country have ignored the calls of physicians to divest their tobacco holdings.
The doctors, in a letter in the Aug. 9 issue of the Journal of the American Medical Association (JAMA), said mutual funds allow investors, including physicians, to turn a blind eye to the fact that they are investing in tobacco stocks.
The article says that mutual funds "have a certain flavor of money laundering."
"Mutual funds allow many of us to profit from tobacco without openly confronting the morality of such investments," said the article, which was written by Dr. J. Wesley Boyd, Dr. David U. Himmelstein and Dr. Steffie Woolhandler, all researchers at Harvard in Boston.
The article led another group of doctors, Physicians for a National Health Program, to call on mutual funds to divest their tobacco stock holdings. The physicians group is a not-for-profit group in Chicago that is pushing for national health insurance and increased investment in public health.
"We feel that these tobacco holdings are collaborating in the most serious cause of death and morbidity in the nation," said Dr. Quentin Young, national coordinator of the physicians group.
The journal article included statistics which showed that Fidelity Investments owned $6.6 billion in Philip Morris stock as of last year, or just over eight percent of the company. It also showed that The Vanguard Group owned $1.16 billion in Philip Morris stock, about 1.42 percent of the company. It said that TIAA/CREF owned $731 million in Philip Morris stock as well. Philip Morris is the world's largest tobacco company and also owns Kraft Foods and Miller Brewing.
The journal article said that in 1996, the American Medical Association House of Delegates called on professionals in the health care industry to divest of their tobacco holdings, including those in mutual funds.
"Apparently the AMA's call for divestment of tobacco stocks has had insufficient effect," the Harvard doctors wrote.
Despite this call for divestiture, it appears that most fund companies are not budging on the issue at this time because investors have not raised the issue, according to at least two fund industry spokespeople. The authors of the article said doctors themselves had not done enough to advocate divestiture.
T. Rowe Price Associates of Baltimore, the eighth-largest mutual fund company in the country, holds about $168 million in Philip Morris stock for its mutual funds, according to data compiled by the Calvert Group, a socially-responsible mutual fund family in Bethesda.
"It's not a big holding across the firm," said Steve Norwitz, spokesperson for T. Rowe Price, about the Philip Morris stock in its funds. About 20 of the 59 funds examined by Calvert had Philip Morris stock as of year-end 1999. For those investors who do not want to put their money in tobacco, there are socially-conscious fund families that offer mutual funds without tobacco stocks, said Norwitz.
"By and large [tobacco] hasn't been an issue that investors have raised," said Norwitz. "People who invest in the funds must be comfortable with that."
The ARK family of mutual funds, an affiliate of Allfirst Bank, also in Baltimore, has about $1.8 million in tobacco holdings in three of its mutual funds. The holdings include Philip Morris as well as UST, which sells chewing tobacco products such as Skoal. Michele L. Dalton, a senior vice president with Allfirst, said that the bank is looking into creating a series of socially-responsible mutual funds.
However, the managers of the current line-up of funds are simply looking for good investments, she said.
"We don't claim that our funds are socially-responsible," Dalton said. "We are going to look at securities that are appropriate for each portfolio. If we are holding a security, we think it's a good investment."
The journal article said that most mutual funds do not market themselves as socially conscious anyway.
"Mutual funds openly profess their focus on making money - few claim a broader social mission," the article said.