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Mutual Funds
A fund with a conscience
October 29, 1999: 8:22 a.m. ET

Manager Sophia Collier runs socially responsible funds -- and much more
By Staff Writer Martine Costello
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NEW YORK (CNNfn) - Years before she founded a $1.2 billion mutual fund company, Sophia Collier lived on an Indian reservation, fixed boats, ran a construction business, wrote a book, and made millions selling soda.
     Now, at 43, in addition to overseeing five socially responsible funds at Citizens Funds, she's a major investor and president of a company that is hoping to create a new video and data distribution network.
     "So much of being a success is perseverance as much as ideas," Collier said.
     The Citizens Index Fund, which Collier manages, has $569 million in assets and is up 6.1 percent year to date as of Tuesday. The fund has a coveted five-star rating at Morningstar, putting it in the top 10 percent of its category.
     A soft-spoken woman who talks about her accomplishments very matter-of-factly, Collier likes to joke that her experiences have left her with a "skunk wave" of gray hair. She pronounces her first name Soph-eye-ah.
     "I've always been interested in trying to get involved in things," she said with typical understatement.
    
Inspiration for a maverick

     Collier, who grew up in New York, graduated from a boarding school at 16 in Sedona, Ariz., a desert town north of Phoenix known for its ancient Indian ruins and breathtaking red rock mountains. She can recall sitting on a high peak, staring out at the desert and thinking about the writings of Antoine de Saint-Exupery, the French author of "The Little Prince" and other stories.
     "Saint-Exupery said that the desert was very magical and awe-inspiring," she said.
    
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     Collier never went to college. Instead, she followed in the footsteps of her unconventional grandmother, who went to Paris in 1905 at age 16 and studied at the Sorbonne.
     "My grandmother was quite an intrepid woman," Collier said. "She was somebody I admired a great deal, who took an interest in me and encouraged me to be all I could be and get out in the world."
     Between the ages of 16 and 20, Collier lived on a Hopi Indian reservation and fixed boats in Arizona; and then ran a construction company and a food co-op in Portland, Maine. She published an autobiography of those years, called "Soul Life," at 20, and moved to Brooklyn in 1976.
     She and a childhood friend founded SoHo Natural Soda in her Brooklyn kitchen when she was 21. The sodas had no caffeine, preservatives or cane sugar and came in colorful bottles with a distinctive checkerboard design. Collier created all of the flavors herself, including the first flavored seltzer to hit the market.
    
From fizz to funds

     She sold the business in 1991 to Seagram, and she used her profit to acquire a socially responsible money market company called Working Assets. She changed the name to Citizens Funds and introduced other investing products.
     "With the soda company, I tried to make a product that was very delicious, using high-quality ingredients, with packaging that was visually rich and aesthetically pleasing," she said. "In some sense, creating a mutual fund is a similar activity. You're trying to create a product that has wonderful ingredients in an individual sense but form them into a portfolio where they make an improved whole."
     As with her sodas, Collier carefully screens the "ingredients" of her mutual funds to exclude companies that don't meet socially responsible standards. The funds won't invest in Big Tobacco, firearms manufacturers or companies with a bad environmental record, among other issues.
     Collier created the Citizens Index of 300 large-cap companies to be the basis for the Citizens Index Fund. The top holdings as of June 30 include Microsoft (MSFT), Cisco Systems (CSCO), Lucent Technologies (LU), Intel (INTC) and MCI WorldCom (WCOM).
     The companies are more aggressive than the S&P 500, and tend to focus on the themes of technology, communication and globalization, she said.
     The Securities and Exchange Commission is reviewing a second index of small-cap stocks of companies in the range of $300 million to $2.5 billion. Collier couldn't elaborate about the index while it is under review with the SEC. The fund group hopes to introduce the new index in January.
    
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     "We find socially responsible companies in every sector and virtually every industry," Collier said. "It seems such a natural way to invest … Why buy into liabilities and hidden risks that are created by poor practices? It's a good way to assess companies."
     Besides Citzens Index Fund, the company has Citizens Emerging Growth Fund, Global Equity Fund, Income Fund, and the Working Assets Money Market Fund.
     The state of New York recently chose Citizens to manage $250 million in pension assets, which Collier said is the largest amount ever awarded to a socially responsible management company.
    
A new venture in technology

     But it seems that a career change into mutual funds wasn't enough for Collier. In 1998, she stepped down as president and chief executive of Citizens Funds to tackle yet another project --information technology. She remains "chair" -- her formal title -- of the board of directors and heads the management team at Citizens Index Fund.
     She is president and a major investor in Broadwave USA Inc., which hopes to introduce television and Internet service through Northpoint Technology, a patented digital wireless system.
     "A lot of people are learning about our technology for the first time," Collier said. "We will be able to have a new nationwide video system that would be launched in competition with franchise cable companies."
     As part of the Broadwave team, she's helped create a network of affiliates that will offer Northpoint.
     "This is an interesting time in the investing world," Collier said. "There are so many things that are happening that are new. There are so many ways for investors to get involved."
     Collier said she routinely works 12-hour days, and it seems clear she jams as much as she can into every moment. (In fact, out of three interviews for this story, she was late for one and missed another entirely). Her assistant keeps track of her many commitments, often saying things like, "She's got some time this evening if you're available."
     When asked what else she would like to do in her life, Collier thought a moment and said, "surfing."
     "Let's see: I'm 43 now, so that means I have about 20 years of surfing," she joked.
    
A mainstream strategy?

     Emily Hall, an analyst at Morningstar, said Citizens Funds has played a significant role in bringing socially-responsible investing to the mainstream.
     "It's a top performer," Hall said of Citizens Index Fund.
     And a small-cap fund would fill quite a void in socially responsible investing, she said.
     But at the same time, the funds aren't cheap, Hall said.
     Citizens Index Fund has an expense ratio of 1.45 percent and Citizens Income Fund's costs range from 1.35 percent to 1.45 percent, Collier said.
     Hall said the fees for an index fund and a bond fund are unusually high. Socially responsible managers argue expenses are higher because the screens require more research, she said. But a passively managed index fund is usually around 0.98 percent and a bond fund, 0.96 percent.
     Collier said the fees are higher than the fund group would like, but they have come down every year. She hopes they will continue to fall as assets grow.
     "We're hoping to get the fees to the 1.25 percent range," Collier said.
     Mark Groesbeck, a certified financial planner at Stanford Group Co. in Houston, said he is impressed with Citizens Index Fund. Its 37 percent weighting in technology is aggressive for an index fund, he said.
     "This fund carries a good message," Groesbeck said. "You don't have to give up good returns to invest on a socially responsible basis."
     Collier likes to quote billionaire investor George Soros, who once said it's not so much that he is right more than the average person -- he just can recognize that he is wrong more quickly.
     "He recognized more quickly that he was wrong and he could change courses," Collier said. "You need to identify if you're on the wrong course and correct it - and not give up."Back to top

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.