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Entrepreneur, Jan, 2004 by Jennifer Pellet

More and more investors are jumping on the responsible-investing bandwagon, choosing mutual funds based on nonfinancial criteria, from those that shun tobacco, alcohol or weapons-related investments to those that factor in environmental concerns. Assets in funds using one or more of these strategies went from $40 billion in 1984 to $2.34 trillion in 2001, says the World Resources Institute, a washington, DC, environmental research and policy group, which estimates more than 230 mutual funds incorporate socially responsible investment (SRI) strategies.

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Despite the proliferation of SRI options, it's still a costly proposition, according to a recent study of SRI mutual funds by Wharton finance professor Christopher C. Geczy and graduate student David Levin. "Socially responsible investors can sacrifice as much as 31 basis points of performance per month, or 3.7 percent [per] year," says Geczy. "Over 30 years, that's a huge amount."

Some give up more than others, says Geczy."Market indexers, who mimic the S&P 500 through a combination of SRI funds, sacrificed 5 basis points [per] month, or 0.6 percent [per] year, for eschewing non-SRI funds. But investors who choose actively managed funds pay a heavier price."

JENNIFER PELLET (jpellet5@aol.com) is a freelance writer in New York City specializing in business and finance.

Business Services Industry

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Entrepreneur, Jan, 2004 by Jennifer Pellet

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