Mutual Funds
Gay-friendly funds
March 27, 2001: 7:25 a.m. ET

Funds look for companies with good track records on gay and lesbian issues
By Staff Writer Hope Hamashige
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NEW YORK (CNNfn) - Shelly Meyers wants to make one thing clear about investing in gay-friendly companies: it's not just the socially progressive thing to do, it is also a wise investment consideration.

Companies are not mandated to have anti-discrimination policies based on graphicsexual orientation, Meyers points out. Companies that have adopted policies protecting gays and lesbians on the job indicates to Meyers it is a forward-thinking business.

"It is an indicator of what the management team is like and tells me they are probably more cognizant of what a 21st century work force is composed of and what 21st century clients look like," said Meyers, president of Beverly Hills-based Meyers Capital Management.

There may be something to her investment logic. Meyers Pride Value graphicFund, which invests in gay-friendly companies, has posted a three-year annualized return of 11.31 percent, putting it ahead of 84 percent of its peers.

Meyers pointed out that since its launch in 1996, the fund has never fallen out of the top 50 (out of about 4200) of domestic diversified funds.

In other words, she said, the fund is a good choice for anyone who wants to make a statement about discrimination in the work place, but also for any investor who wants to buy in to a top-performing value fund.

Going beyond gay-friendly

As a rule, the Meyers Pride Value Fund (MYPVX: Research, Estimates) invests in companies that prohibit work place discrimination based on sexual orientation.

Although, it too is considered gay-friendly, Friends Ivory & Simes' mutual graphicfunds are more broadly defined socially responsible mutual funds. Specifically, the companies they invest in also have to pass environmental, human rights and product safety standards.

Seem like a lot to ask of a company? George Walker, president of the Friends Ivory funds, doesn't think so. His philosophy, similar to Meyers', is that poor environmental records, using Third World sweat shop labor and allowing discrimination are all bad business practices that will eventually hit company profits and share prices.

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"If they have environmental disaster, they are going to pay," Walker said. "If they get caught using child labor, and consumers stop buying products, it hurts the bottom line. If they discriminate and get involved in lawsuits, that, too will cost a lot of money."


As a rule, the Friends Ivory funds do not invest in alcohol, tobacco or gambling stocks even if the companies are progressive in other ways.

Friends Ivory & Simes, a 170-year-old financial services company based in the United Kingdom, launched two socially aware mutual funds in the United States just last year. One, Friends Ivory Social Awareness Fund, invests in American companies, while the other, Friends Ivory European Social Awareness Fund, invests in European companies that meet Friends Ivory's screening criteria.

The Friends Ivory funds, much like the broader market, had a rocky year in 2000. The U.S. fund lost 14 percent of its value in 2000 and the European fund lost 10.8 percent. Walker said the funds have suffered, in part, because of bad timing. Both were launched early last year, and the ensuing stock market dip has not been advantageous for growth funds.


The Meyers Pride fund had a better year in 2000. It was off 0.18 percent, compared to a loss of 9.1 percent for the S&P 500.

Who passes the gay-friendly test?

So, who meets the criteria anyway? Well, it's probably not what you think. A company doesn't have to be as aggressive with their social policies as Ben & Jerry's to be considered gay-friendly.

graphicIn fact, many of the companies on the Meyers Pride and Friends Ivory holding lists are of the buttoned-down variety with old corporate names like JP Morgan Chase & Co. (JPM: Research, Estimates) and Johnson & Johnson (JNJ: Research, Estimates).

And if there is a current poster-child for gay rights in the workplace these days, it is IBM (IBM: Research, Estimates), who recently topped the Gay Financial Network's rankings of gay-friendly companies in the U.S. After Congress voted not to extend federal employment protection to gays and lesbians, IBM very publicly extended domestic partnership benefits to all employees. It also included in its annual report a discussion of the value of its gay and lesbian employees.

graphicWalker said most companies in high technology, telecommunications and in financial services have non-discrimination policies. Among the top holdings in the Social Awareness Fund are Cisco Systems (CSCO: Research, Estimates), Wells Fargo Co. (WFC: Research, Estimates) and SBC Communications (SBC: Research, Estimates). Of the companies in the Meyers Pride Fund, 47 percent are telecommunications, computer hardware and software and financial services companies.

Meyers and Walker both pointed out that, although they use screens when picking stocks, the gay-friendliness of the company is not the primary consideration in investing. Both say, first and foremost, they are concerned with finding companies that are good investments.

Meyers and Walker do have different investing strategies. Meyers' strategy is to scour the markets for undervalued companies. And Walkers funds look to invest in growth stocks.

Trying to make a difference, too

Although both Meyers and Walker both believe their top priority is to create solid, well-performing funds for their investors, both recognize they, as investors, can influence company policy. When researching a company, said Meyers, they often begin a dialogue with graphiccompany officials about discrimination based on sexual orientation in the workplace.

Meyers said she has not had to drop many companies from the fund. Meyers did sell Mobil Oil Corp. when it merged with Exxon. Mobil had anit-discrimination policies in place, Exxon did not. Meyers dropped the oil company from the portfolio and said she won't be buying Exxon stock until there is a change in that area. Exxon did not return phone calls regarding the company's discrimination policy.

Walker, too, said he often begins dialogue with the companies he invests in about ways they can improve their environmental record, discrimination policies and product safety records. Walker said he prefers to work with companies to constantly improve their records rather then drop them when they make a mistake. One case where he actually dropped a stock from the portfolio was when Bridgestone/Firestone Inc. recalled 6.5 million tires last fall. Bridgestone/Firestone has said the tread separation problems were caused by a number of factors, from problems at a manufacturing plant to low tire pressure.

"There are times when there is room for exclusion," he said. graphic