Conscience Money

In the hardheaded world of professional money managers, the rule for years was that the only wise investment was the one that turned a profit. An investor troubled by the idea of financing the military-industrial complex, pollution or racist hiring practices had to hunt up "clean" stocks on his own. Now, however, there is a new breed of mutual funds that caters to the customer with social scruples.

About half a dozen such "conscience funds" are either in operation or in registration with the Securities and Exchange Commission. Each is still small by industry standards (less than $2,500,000 in assets). Except for the forthcoming Dreyfus Third Century Fund, all are "no load" funds sold without a sales charge. The generalities end there, since what seems a socially desirable investment to one portfolio manager may be an abomination to another. Among the funds that allow an investor to put his money where his conscience is:

PAX WORLD FUND, launched last summer by two national officers of the United Methodist Church, avoids investing in any company on the Pentagon's list of the 100 largest U.S. defense contractors, or in any firm that counts on defense-related products or services for more than 5% of its sales. The churchmen have found this a difficult mandate to observe. They wanted to invest in Johnson & Johnson Co., which sells medical supplies to the military, but the SEC ruled that the company is a defense contractor as defined in the Pax World prospectus.

THE DREYFUS THIRD CENTURY FUND is the newest addition to the mutual fund empire of Howard Stein. Third Century's portfolio analysts will use a complex system of weighted criteria. Firms will be ranked according to the concern they exhibit for consumers, the environment, occupational safety and equal employment opportunity. The companies with the highest ratings will then be examined in light of normal investment standards.

VANTAGE 10/90 FUND, the oldest and largest of the conscience funds, has grown from $135,000 in assets to $2,500,000 in three years. Its net asset value per share has increased 9% since 1969, while that of the mutual-fund industry as a whole has dropped 10%. Vantage allows its shareholders to specify how 10% to 15% of their capital is to be divided among companies active in three categories of social concern--the environment, the cities and hunger. The rest of the fund's assets are invested by its managers according to largely financial considerations.

SOCIAL DIMENSIONS FUND, founded by Ralph Quinter, 32-year-old president of the old-line Pennsylvania Mutual Fund, has not yet been approved by the SEC. Quinter has arranged for the Council on Economic Priorities, a New York-based public-interest research group, to provide information about which companies and industries behave best with regard to such "social criteria" as environmental protection, employee job training and product safety.

FIRST SPECTRUM FUND is the brainchild of two former Manhattan stockbrokers, Thomas N. Delaney Jr. and Royce N. Flippin Jr., who scraped together $50,000 of their own money and have raised $125,000 from new investors. Contrary to some views of social responsibility, First Spectrum invests in pollution-prone oil and manufacturing companies if their managements are taking steps to protect the environment. The fund bought into Norton Simon Inc. because of the Hunt-Wesson Foods subsidiary's policy of hiring ex-convicts--and shrugged off the fact that another Simon subsidiary, Somerset Importers, has a different claim to fame in its Johnnie Walker Scotch. "We decided it would be hypocritical to exclude the company just because it sells Scotch," Delaney said. "We both drink."

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