Pax World Balanced Fund last week introduced a contribution program whereby investors can contribute dividends and capital gains for humanitarian aid to Iraqi citizens affected by the ongoing war.

Investors can contribute to Pax World Service, an affiliate of Mercy Corps, a relief and development organization operating in the Middle East and throughout the world.

Mercy Corps will use contributions from Pax World Balanced Fund investors to provide refugees with food, shelter, sanitation facilities and medical clinics for displaced families.

The fund seeks to capitalize on the idea of moral investing, where the stocks contained within a fund are free of underlying ties to defense companies, or other controversial industries.

With the U.S.-led war against Iraq weighing heavily on the minds of global citizens, Pax World's new campaign takes the idea of socially responsible investing one step further, to championing humanitarian and political causes through donations. Similarly, Pax World began a campaign to help Afghanistan last fall (see MFMN 9/2/02).

"Many investors are attracted to Pax World Funds because they want to take a positive approach to dealing with the world's ills, working to foster peace wherever possible," said Pax World Funds President Thomas W. Grant. He further asserted that the fund does not invest in war-related industries, companies that manufacture weapons or companies that derive more than 5% of gross sales from contracts with the Department of Defense.

According to Maryann Murphy, a spokeswoman for Pax World, the fund has noted a significant increase in investors participating in its flagship socially responsible fund over the past five years, potentially due to increased awareness about global events and the fact that "the world is becoming a smaller place."

The proposed Iraqi effort is not the first foray into humanitarian-based aid efforts for the fund. On a worldwide basis, Pax World Balanced Fund investors already have contributed $775,000 over the past four years for Pax World Service/Mercy Corps humanitarian efforts in more than 30 countries, including, most recently, the assistance begun last fall for civilians in the rebuilding of post-war Afghanistan.

Even prior to Pax World's most recent Afghani efforts, Pax World investors already contributed $80,000 in Afghan aid over the previous three years.

Pax finds itself among several funds seeking to appeal to socially responsible (SRI) investors. Others include Calvert, Dreyfus, Ariel and Aquinas, all of which have various stipulations as to what their respective managers will invest in.

Capitalists or Activists?

But will this trend of moral investing sweep the mutual fund marketplace? Burton Greenwald, an independent consultant, suggested that "although these charitable initiatives will attract the socially conscious investor, by and large, the general investing public is most concerned with overall fund performance."

New York University economics Professor Andrew Caplin echoed this sentiment, suggesting socially responsible funds "represent an excellent marketing tool and will likely continue to gain investors provided they can continue to do well when compared to other, normal funds." At the end of the day, it comes down to how much the investor earns, Caplin said. While imposing strict criteria as to what stocks to include in its portfolios, and as a registered investment company that bears a responsibility to investors, Pax World must continue to retain a competitive edge.

However, this is not to say that overall performance is the be-all and end-all consideration.

Investor Robert Romano, a Manhattan attorney, believes "if a person had the choice to make 7% on a socially responsible fund, or 8% on a fund comprised with less-than-ethical companies, you would be surprised how many investors would opt to go with their conscience."

Romano was first made aware of socially responsible mutual funds through his daughter, who takes an active interest in global humanitarian issues. Now, he researches online on sites such as, browsing the criteria that individual funds set for their stocks. He suggested that it is not impossible for investors to find a good fit between a socially responsible fund and one that yields significant returns. An example of this would be Ariel, whose title fund and appreciation fund were recently awarded a four-star rating by Morningstar.

Copyright 2003 Thomson Media Inc. All Rights Reserved.


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