Smug Profile: Non Profit + Green Investing = Bliss

It has been a few weeks since posting, but it's been a busy period. My models have been down, but there's no cause for alarm, all's well in Smug land. In fact, I'm busy looking for open positions in green investment funds, which brings me in part to my self serving post of the day - a write up of Green Century Balanced Fund, a Green Century Capital Management mutual fund:

Ticker: GCBLX
Inception: March 18, 1992
Asset Type: Mutual Fund - Mixed
Markets: Domestic
Smug Category: Bond
Included in Smug Asset Pool?: Yes
Returns:

YTD	-5.85%
1 year	-3.73%
3 year annualized	1.90%
5 year annualized	5.36%

Min Investment: $2,500
Min Retirement Investment: $1,000
Minimum Additional: $50 automatic investment, $100 otherwise
Sales Load:
$2,500 to $24,999.99: 0.00% of offering price
$25,000 to $99,999.99: 0.00% of offering price
$100,000 or more: 0.00% of offering price

Management Fees: 0.65% for 2007 - based on AUM.
12b-1 Fees: None
Other fees: 0.73%
Total Annual Fee: 1.38% for 2007.

I'll be honest - this fund has not been my first choice historically, in large part because the fees are much higher than others at 1.38%. That said, there is good reason to be excited about this fund. 100% of net profits generated fund non profit research. Yes, 100%. It's almost comically non capitalist. That, to me, says in a nutshell what Green Century tries to accomplish. Not only do they have fairly selective screens on their investment choices, but the revenue goes into a pool and subdivided by the consortium of non profits that "own" Green Capital Management.

Then there's the investment choices themselves. Similar to Pax World's High Yield Fund, which was just dinged by the SEC for not following their own screens several years ago (tsk), Green Century Balanced is a combination of corporate debt, other bonds, and a modicum of growth investing thrown in to keep the returns nice and round. It should act as a nice, semi stable piece of moderate income with moderate growth, despite it's tough year this year (who hasn't had a tough year, really?).

As an eternal skeptic, my first question was, "what do these non profits do?" Again, I was surprised by the answer. GCBLX funds some of the biggest and brightest think tanks in the country, including the state "PIRG" groups (Public Interest Research Group). As if being a responsible investor by investing in Green Century is not enough, you'd also be inadvertently (or maybe "advertently?") supporting research in responsible business practice to boot! The nice long 10+ year track record of beating their benchmark doesn't hurt, either.

All in all, the fund is definitely worth looking at. And cross your fingers I get the job with them.

Smug Profile: Waste Not, Want Not

Smug's next stop on the profile bandwagon is an industry that definitely does not get its due accord - waste and recycling. Waste management, like water treatment, is an inevitable need of every civilization. In that way, when taken as a whole, waste should tend to act more like a commodity than equity. I'm still watching for the moment you can readily buy and sell futures contracts on recycled metals (especially in ETF fashion), but for now, we can at least take solace in Market Vectors' Environmental Services ETF:

Ticker: EVX
Inception: October 10, 2006
Asset Type: ETF
Markets: Global
Smug Category: Waste
Included in Smug Asset Pool?: Yes

Returns: YTD 2.30%

Expense Ratio: 0.55%
Total Market Cap: 42M
Annual Turnover: 3%
Current Yield: 1.03%

With a moderate expense ratio, EVX offers exposure to what Smug believes is one of the unaccounted for basic needs investments. Along with food, water, clothes, and a roof over our heads, it is inevitable that we will produce waste. The long term prospects are astounding as populations soar and growth in China and elsewhere abroad booms, the need for increasingly efficient and intelligent waste management is tantamount. Along with water, we consider waste a commodity and expect to move with lower correlations to the overall market as the track record increases.

All in all, consider it as exposure to a relatively obscure but well positioned sector. And be smug, invest sustainably.

Dividends: The Green Investor's Atlantis

Big media attention distracts from the fact that green is still a niche investors' market. As more and more utility companies sign on to green initiatives, steady yielding dividends should get easier to come by. Until then, there are ways to piece together some nice income, albeit more unstable than traditional income vehicles.

I've put together, at the request of a Seeking Alpha commenter (thanks EnfantTerribles) a Sort Of Incredible Green Income Machine. Here's the list, with some suggested allocations as well:

Asset	100.00%	Yield		Portfolio Yield
PAXHX	17.50%	7.43%		1.30%
CRATX	15.00%	4.64%		0.70%
DSBFX	15.00%	4.47%		0.67%
CSIBX	10.00%	3.87%		0.39%
DUPFX	5.00%	3.13%		0.16%
LRY	15.50%	7.28%		1.13%
IDA	10.00%	4.07%		0.41%
WFMI	5.00%	3.46%		0.17%
WTR	3.00%	3.29%		0.10%
ORA	2.00%	0.43%		0.01%
LNN	2.00%	0.34%		0.01%

Total Yield:

5.03%

Agriculture	7.00%
Bond	62.50%
Diversity	0.00%
Eco Reserve	0.00%
Energy	12.00%
Low Carbon	0.00%
Real Estate	15.50%
Recycle	0.00%
Social	0.00%
Technology	0.00%
Total Green	0.00%
Water	3.00%

As you can see, the majority of the holding are bonds, which isn't ideal for diversification's sake. All the yields listed are based on Friday (7/18) closing prices and the last dividend paid. They are most definitely not guaranteed, but the Smug systems do their best to weed out inconsistent payers. There are some non bond holdings worth looking at, and some stock holdings as well yielding above 3%. The overall stock allocation, however, falls less than 50% at around 38% instead. That should give some cushion for growth amongst the bonds and hopefully continue to flirt with that 5% yield mark.

Because of the high concentration in yielding bond mutual funds, there isn't much in the way of inter-green diversity either. Real estate is an obvious place for steady yields, and our one traded "almost green-ish" real estate stock pick, Liberty Property Trust (LRY), makes for a nice yield especially now that real estate prices have tumbled despite ever consistent cash flows. If those cash flows dry up, though, better watch out. Also in the stockpile is IdaCorp (IDA), an Idaho based energy company generating most of it's energy from hydroelectric sources. Utility companies are usually recession-proof tools, so I wouldn't be surprised to see the price tumble a bit if serious recession concerns start to fade in the backdrop. That said, over the last 7 years the price has remained fairly consistently around the $30/share mark, possibly a good sign for forward stability as well.

I also included Whole Foods Market, Inc (WFMI), as they are a nice solid yielder, but as a "specialty" grocery store with food prices on the rise, it's a bit of a risky play. If you're looking for a really steady yield without as much volatility involved, stick with the mutual fund options. Domini, Pax World, and Communtiy Capital Management are old hands with solid business models. PAXHX clocks in as the cheapest overall bang for you buck - currently a 7% yield, a 1% expense ratio, and a measly $250 minimum!

All in all, it's wise to tread lightly looking for green dividends. I wouldn't be surprised if they start cropping up here and there in the not too distant future, especially with the first pure green REIT on the horizon (in SEC filing stage), but for now, be careful and don't expect great stability except from some of the tried and true stalwart bond funds.

Green Investing on a Budget: $10K Portfolio

So you have $10,000, you've read yesterday's post, you're all set up and ready to invest responsibly, and you have no idea where to start. First, you can start with our earlier posts: here, here, and here. It lays the baseline for what I'll talk about in terms of asset allocation.

Here are some good suggested portfolios for the $10K investor at varying risk tolerance / time horizon levels:

Concept: Complete Portfolio
Risk Level: High Risk
Timing: Long Horizon (5+ years)
Suggested Allocations:

PAXHX	14.50%	$1,450	Bond
DBA	17.50%	$1,750	Agriculture
EVX	15.00%	$1,500	Recycle
GRN	16.50%	$1,650	Low Carbon
PBD	18.50%	$1,850	Energy
DSI	15.00%	$1,500	Social
Cash	3.00%	$300

In this scenario, the one mutual fund, Pax World High Yield, adds bond exposure to round out the overall holdings. It has an average expense ratio (roughly 1%) and a very low minimum at $250 for non IRA accounts (IRAs have no minimum), so it fits well amongst the ETFs. DBA makes an excellent hedge in agriculture, as well. I couch this allocation with the disclaimer that many of the other pieces are correlated, since achieving maximum diversity with $10,000 is difficult to do. You should see some nice diversification with the agriculture play (typically, agriculture is zero to negatively correlated to the S&P) and the bond play making over 30% of the portfolio non correlated. In the future, it may make sense to add TAN, FAN, or FUE, the solar, wind, and biofuel ETFs, but for now, PBD covers all those bases. The second portfolio is for more green specific biased investors who only want $10,000 of coverage in their total portfolio, in which case more risk is warranted (and unavoidable).

Concept: Total Green
Risk Level: High Risk
Timing: Long Horizon (5+ years)
Suggested Allocations:

EVX	15.00%	$1,500	Recycle
FAN	10.00%	$1,000	Energy
FUE	10.00%	$1,000	Energy
GRN	15.00%	$1,500	Low Carbon
PBD	10.00%	$1,000	Energy
PHO	15.00%	$1,500	Water
PZD	12.00%	$1,200	Technology
TAN	10.00%	$1,000	Energy
Cash	3.00%	$300

Overall, this is 40% in green energies - biofuel, solar, wind, and a combination of all forms in PBD. Because it's technology intensive, it will have some pretty high beta and some pretty volatile motion. Ultimately, it's a position play in a larger portfolio, and not well suited to a $10K only investor. The water and recycling components (PHO and EVX respectively) round out the total green theme, with some carbon (GRN) thrown in as well. This portfolio is not for the faint of heart, and I certainly wouldn't recommend it to anyone as their total portfolio. But as a green piece that you can leave alone for a good long while, it's worth considering.

In the next few posts, I'll detail some low(er) risk $10K portfolios, and I'm going to start focusing on some day trading as well. Look out for more!

Green Report Card: 2Q2008

For basic retail investors, there are a lot of mutual fund options for green. We at Smug have steadily been analyzing some of them, at least in a superficial way (and in some more in depth ways), but with so many coming out, it makes sense to review them all in one place. Smug has created a basic scoring system that incorporates a combination of historical returns, risk measures (alpha, beta, R-squared, etc.), expense ratios, and front/back end load. It penalizes the youngest funds for the most part, but avoids overweighting funds simply for longevity. It's a good place to start if you don't know what you're looking for, and it combines some of our favorite green and socially responsible investments.

The first report card is below. If there are funds that you know of that don't appear, feel free to comment and let me know, we're more than happy to assess every green based asset.

Ticker	Fund	Score	YTD	1 Month	3 Month	1 Year	3 Year	5 Year	Expense
PAXHX	Pax World High Yield A	12	1.67%	0.82%	3.17%	1.70%	7.07%	7.43%	1.00%
NALFX	New Alternatives Fund A	6	-3.35%	4.30%	14.45%	5.00%	22.46%	19.82%	0.95%
TICRX	TIAA CREF Social Choice Equity	6	-2.05%	2.43%	7.02%	-6.31%	N/A	N/A	0.21%
AECOX	Allianz RCM Global EcoTrends Fund A	5	-8.00%	4.39%	15.50%	22.77%	N/A	N/A	%
SPEGX	Spectra Green Fund	4.5	-9.53%	0.73%	3.74%	2.07%	15.93%	13.55%	1.24%
PARWX	Parnassus Workplace Fund	3	3.39%	3.41%	11.07%	1.45%	8.69%	N/A	1.20%
VFTSX	Vanguard FTSE Social Index Fund	3	-4.97%	1.81%	6.18%	-13.80%	3.97%	6.62%	0.24%
CGAEX	Calvert Global Alternative Energy Fund	2	-5.95%	4.62%	16.73%	22.33%	N/A	N/A	1.85%
PORTX	Portfolio 21 Fund A	2	-1.95%	2.95%	6.06%	-4.21%	14.16%	15.21%	1.50%
SMCNX	SAM Sustainable Climate Fund	2	-2.66%	5.56%	13.30%	N/A	N/A	N/A	%
CSIBX	Calvert Social Investment Fund Bond	1	-0.15%	-0.19%	-0.99%	5.12%	4.04%	4.66%	1.11%
WGGFX	Winslow Green Growth A	0.5	-16.99%	6.23%	6.75%	-6.68%	12.42%	15.85%	1.45%
ARFFX	Ariel Focus Fund	0	0.64%	0.82%	6.05%	-7.66%	N/A	N/A	1.25%
DUPFX	Domini European PacAsia Social Equity A	0	-4.84%	0.86%	4.78%	-10.28%	N/A	N/A	1.58%
DEUFX	Domini European Social Equity A	0	-5.78%	0.33%	4.53%	-13.72%	N/A	N/A	1.60%
DPAFX	Domini PacAsia Social Equity A	0	-3.47%	-0.10%	4.71%	-2.14%	N/A	N/A	1.59%
DSEFX	Domini Social Equity A	0	-3.24%	1.47%	8.05%	-10.56%	5.07%	7.35%	1.08%
GAAEX	Guiness Atkinson Alternative Energy A	0	-7.45%	2.87%	13.51%	4.25%	N/A	N/A	1.64%
PGRNX	Paw World Global Green Fund	0	N/A	4.40%	N/A	N/A	N/A	N/A	%
PXINX	Pax World International Fund	0	N/A	2.68%	N/A	N/A	N/A	N/A	%
PXWEX	Pax World Women's Equity A	0	-2.41%	2.09%	6.28%	1.22%	6.39%	8.45%	1.29%
SMWNX	SAM Sustainable Water Fund	0	-1.11%	4.48%	6.99%	N/A	N/A	N/A	%
WGSLX	Winslow Green Solutions A	0	-8.88%	3.81%	8.66%	N/A	N/A	N/A	1.45%
MPIAX	MMA Praxis International Fund	-1	-4.34%	1.37%	5.13%	-1.12%	14.38%	15.79%	1.72%
GCBLX	Green Century Balanced Fund	-1	-4.05%	0.93%	2.73%	-5.14%	4.60%	8.11%	1.44%
GCEQX	Green Century Equity Fund	-1	-4.64%	1.57%	5.87%	-8.68%	4.73%	6.93%	0.95%
CSXAX	Calvert Social Index Fund	-2	-5.17%	1.49%	5.94%	-9.13%	4.87%	6.89%	0.75%
CSIEX	Calvert Social Investment Fund Equity	-2	-0.93%	2.38%	7.72%	2.77%	7.79%	8.51%	1.21%
CWVGX	Calvert World Values International Equity Fund	-2	-1.62%	1.86%	8.50%	-8.24%	13.61%	15.15%	1.60%
MYPVX	Citizen's Sustainable Core Opprotunity Fund	-2	-7.22%	1.69%	3.27%	-10.04%	6.95%	10.16%	1.29%
CSIFX	Calvert Social Investment Fund Balanced	-3	-2.29%	1.07%	2.89%	-3.65%	4.49%	6.22%	1.19%
CAAPX	Ariel Appreciation Fund	-3	-3.60%	1.94%	4.66%	-14.83%	3.40%	7.91%	1.12%
DSBFX	Domini Social Bond Fund	-4	0.76%	-0.70%	-1.77%	5.81%	3.42%	2.66%	0.95%
SCFSX	Sierra Club Stock Fund	-4	-4.75%	1.88%	4.64%	-12.92%	3.17%	6.71%	1.26%
BCIIX	Brown Capital Management International Inst	-5	-10.06%	0.16%	-0.08%	-10.62%	11.96%	16.18%	2.00%
CMIFX	Calvert Social Investment Fund Enhanced	-5	-3.14%	1.76%	5.85%	-10.51%	4.38%	6.91%	1.20%
CRATX	CRA Qualified Investment Retail (CRAIX)	-5	0.26%	-0.78%	-1.11%	5.06%	N/A	N/A	1.00%
WAEGX	Citizen's Emerging Growth Standard	-8	-4.58%	2.90%	6.68%	-5.94%	8.33%	10.45%	1.88%
ARGFX	Ariel Fund	-9	-8.47%	1.31%	0.83%	-20.24%	0.02%	7.88%	1.03%

And this quarter's top scorers in the Smug Asset Categories are:

Category	YTD Ret	Ave Score	Best Bet	Name
Agriculture	0.00%	0.00
Bond	0.64%	1.00	PAXHX	Pax World High Yield A
Diversity	-2.41%	0.00	PXWEX	Pax World Women's Equity A
Eco Reserve	0.00%	0.00
Energy	-6.70%	1.00	CGAEX	Calvert Global Alternative Energy Fund
Low Carbon	0.00%	0.00
Real Estate	0.00%	0.00
Recycle	-8.88%	0.00	WGSLX	Winslow Green Solutions A
Social	-3.87%	(1.18)	TICRX	TIAA CREF Social Choice Equity
Technology	0.00%	0.00
Total Green	-6.20%	2.70	NALFX	New Alternatives Fund A
Water	-1.11%	0.00	SMWNX	SAM Sustainable Water Fund

Obviously, it's been a tough year, mostly recently. That's why asset allocation matters (see our previous posts here, here, and here).

Note that this information is culled from various third party sources and we cannot vouch for its accuracy. Also note that the scoring system is a Smug model and subject to change in future posts.

Smug Profile: Easy Green Livin'

Most people wake up in the morning, eat breakfast, brush their teeth, and take a train to work. They sit in a cubicle or an office under flourescent lights, printing report after report, drinking lattes and praying for 5 o'clock. After a trainride home or commute in the car, you get home and blast the AC in the summer heat, take out the trash, heat up microwave dinner, watch TV, and go to sleep.

When you think about it, that's a lot of opportunity for green. There's also a lot of room to become an emo kid and decry life, but that's not for us to say really. Think about it: imagine that every time you flush the toilet, you own the company that treats and cleans that water. Imagine as you're sitting underneath compact flourescent bulbs that light your cubicle, you own a piece of the company making that bulb. Imagine when you take out the trash, you own the company that recycles the contents.

It's surprising with all the talk about green in the media, there is very little mention of one of the most central green industries: your life. In the long term, sustainable living solutions make perfect sense in a green portfolio. From water recycling to waste recycling to green transportation, the things we do every day are equally as important (if not more so) than the bigger picture items like energy. If you're a DIYer, watch for future posts about individual ETFs to make your own green living component. Fortunately, Winslow Management has already done the hard work for the retail investors looking for a quick stop solution, the Winslow Green Solutions Fund:

Ticker: WGSLX

Inception: November 1, 2007
Asset Type: Mutual Fund
Markets: Global
Smug Category: Total Green
Included in Smug Asset Pool?: Yes
Returns:

YTD -14.42%

Min Investment: $2,500
Min Retirement Investment: $2,000
Minimum Additional: $50

Sales Load:
$2,500 to $24,999.99: 0.00% of offering price
$25,000 to $99,999.99: 0.00% of offering price
$100,000 or more: 0.00% of offering price

Management Fees: 0.90% for 2007
12b-1 Fees: 0.00%
Other fees: 1.00%
Redemption Fee: 2.00% (<90 day hold)
Total Annual Fee: 1.90% (actual fee capped at 1.45% until 2009)


Let's get the bad out of the way first: WGSLX is a young fund, so consider yourself warned. It's already down almost 15% YTD, but that's not a good reason not to feel good about the long term. Lastly, and most egregiously, is the annual fee of 1.45%, which is higher than I like. Worse per perspectus the fee has been capped at 1.45% until April 2009, which means the startup costs are high and you're getting it at a premium.

With the bad out of the way, let's get to the good. Winslow is another long running company in the style of NALFX, trading their first fund, WGGFX, privately since 1994 and publicly since 2001. They have a history of great performance, with annualized 10 year numbers for WGGFX over 13%. So there is reason to believe the same management team that's been analyzing green for so long will be capable of performing in the new fund (note: past performance not indicative of future results... ha!). More importantly, the industry is an excellent long term prospect. Winslow has stricter controls than many green funds in terms of narrowing its asset pool, and that works to their advantage as it focuses on companies with a real long term commitment to sustainability. Also, if you look at their portfolio holdings, it's clear they are positioning themselves to invest in everyone, not just obvious green investments.

So feel smug and give it a look. As always, see my disclaimer to the right of the page.

Local Vs. Green: Cage Match

There is a lot of barking about green energy, sustainable lifestyles, and all things eco. In the end though, it's far more important to be local than green. Supporting local economies, especially agriculture, would save far more energy than any green solution. The cost of travel for a tomato out of season versus buying tomatoes locally during the season and canning them yourself is obvious, but even the externalities are obvious: more pollution, greater infrastructure strain, more exposure to disease (like the recent salmonella scare) when not buying local.

As an investor, I like the idea of having a small portion of my stock allocation in "local only" companies. Even when it means I own some volatile small cap stocks, it gives you a proxy vote and allows you to help shape your local community as a shareholder. Plus, you have a local knowledge of the companies you invest in: you may have friends that work there, you can see their expansions (or retractions), you know their community involvement... it's like rooting for a sports team. Investing locally is VERY HARD, takes a lot of research, and can be a money losing proposal - especially in tiny tiny markets or states. But there's no reason "local" can't be expanded to a more regional presence (ie, a Rhode Island native investing in Connecticut and Massachusetts companies as well). For more info on local investing, check this awesome listing on PBS's Nightly Business Report website.

On a macro level, you may not be able to invest locally quite the same way, but you can at least try the CRA Qualified Investment Fund:

Ticker: CRATX
Inception: March 1, 2007 (officially, but CRA Shares have longer track record)
Asset Type: Mutual Fund - Bonds
Markets: Domestic
Smug Category: Bond
Included in Smug Asset Pool?: Yes
Returns:

YTD	-0.23%
1 year	5.47%

Min Investment: $2,500
Min Retirement Investment: $2,500
Minimum Additional: $1,000
Sales Load:
$2,500 to $24,999.99: 0.00% of offering price
$25,000 to $99,999.99: 0.00% of offering price
$100,000 or more: 0.00% of offering price

Management Fees: 0.40% for 2007
12b-1 Fees: 0.25%
Other fees: 0.31%
Total Annual Fee: 0.96% for 2007

Another no-load no-redemption-fee fund, CRA fund actually has a 7+ year track record, but they changed their name and ticker last year, hence the shortened record. CRATX invests entirely in debt that qualifies for the Community Reinvestment Act of 1977. Now, the CR Act has its detractors, and one could even argue that it helped perpetuate (some say "caused, which in my opinion is ridiculous) the subprime issue. In the end, CRA does a good job (if not bureaucratic job) of building housing in local communities for those who need it. CRA detractors usually forget that it's not the individuals to whom loans are made at fault, it's the securitization of loans, poor rating system, and Wall Street greed that caused subprime. But why take responsibility when you can pass the buck to poor folks?

As debt funds go, CRATX offers a good deal of leg on its income at 4.25% SEC yield, and they have some really nice details about the effect the fund has on local communities (see the charts in the PDF): 140,000 affordable rental units, 4,660 mortgages, $27.3M in affordable healthcare, $121.4M in community redevelopment, etc.

So feel smug and give it a look - another nice compliment to your socially responsible, sustainable portfolio. As always, see my disclaimer to the right of the page.

Not Quite Green Income

One of the basic things I learned in the non traded REIT (real estate) market is: it's all about the yield. Or at least it used to be before subprime. Now there's a question of credit and resale value. But, as a risk averse investor, I would rather take a stable 6% a year with virtually no volatility than a 10% return with moderate volatility. In my hedge fund, I spend all day watching volatility (or, at least, the model does), measuring vol, and scoring potential vol before investing. Most individuals don't have the tools, time, information, or understanding to measure vol at a constant basis, and that means it may be worth it to not take the risk. While green income doesn't yet exist (though, it's on it's way), there are responsible ways to invest in income vehicles - Pax World High Yield is one example

Ticker: PAXHX
Inception: October 8, 1999
Asset Type: Mutual Fund - Bond
Markets: Global
Smug Category: Bond
Included in Smug Asset Pool?: Yes
Returns:

YTD	1.67%
1 year	2.75%
3 year annualized	6.82%
5 year annualized	7.10%

Min Investment: $250
Min Retirement Investment: $250
Minimum Additional: $50 automatic investment, $250 otherwise
Sales Load:
$2,500 to $24,999.99: 0.00% of offering price
$25,000 to $99,999.99: 0.00% of offering price
$100,000 or more: 0.00% of offering price

Management Fees: 0.83% for 2007
12b-1 Fees: 0.25%
Other fees: 0.71%
Expense Waivers: -0.78%
Total Annual Fee: 1.01% for 2007

Pax, as a company, has several funds I like, including the Women's Equity Fund (formerly a separate entity, bought out last year by Pax) and the brand new-ish Global Green Fund. However, for income and stability, there aren't many funds like Pax High Yield with a commitment to socially responsible and sustainable investing. Interestingly, and I think calculatingly, Pax chooses to minimize it's emphasis on the socially responsible and sustainable message in their prospectus, but it's nonetheless a part of the company ethos. On the website are large sections devoted to community investing, responsible shareholder voting, and sustainable investing in general.

In terms of performance, PAXHX is currently yielding a hefty 6.8% and pays on a monthly basis. That's pretty attractive for the DIYer considering it's a no load fund (despite some high management fees). It's currently 25% or so globally allocated to defray some of the domestic risk, and is currently valued below it's year average as it (along with everything else) saw a dip last October. Pax as a company is definitely worth a look, and the High Yield Fund is a good place to start.

PAXHX is currently in my asset pool, and in the interests of disclosure, and I currently own shares personally. PLEASE READ THE PROSPECTUS BEFORE INVESTING. Though I may own and use this asset in my portfolios, it may not be the correct fund for your individual situation, so this post is by no means a recommendation that you purchase. Please read the prospectus in full before choosing to invest.

Changing Tack *

So I'm going to change the tact of this blog a bit and focus more on the asset pool. I'll still go over my start up process from time to time, but I think the more important information is how a retail investor can invest responsibly. I'll focus primarily on mutual funds and ETFs, since it is my belief that individual stocks is, for the most part, playing darts with money. Mutual funds and ETFs spread out the risk and take more "sector" type positions, and I am as risk averse as they come.

So, in that vein, my bread and butter "green" fund is one of the longest running green energy mutual funds in the country - the New Alternatives Fund (MUTF: NALFX). New Alternatives has a long track record, which many investors swear by. In my opinion, their true strength isn't their track record (which is excellent), but their innovation in investing green literally decades before anyone else thought to. Here's the rundown and the fine print:

Ticker: NALFX
Inception: September 3, 1982
Asset Type: Mutual Fund - Equities
Markets: Global
Smug Category: Total Green
Included in Smug Asset Pool?: Yes
Returns:

YTD	-5.06%
1 year	1.71%
3 year annualized	20.48%
5 year annualized	18.90%

Min Investment: $2,500
Min Retirement Investment: $2,000
Minimum Additional: $50 automatic investment, $250 otherwise
Sales Load:
$2,500 to $24,999.99: 4.75% of offering price
$25,000 to $99,999.99: 3.85% of offering price
$100,000 or more: 2.91% of offering price

Management Fees: 0.53% for 2007 - based on AUM.
12b-1 Fees: None
Other fees: 0.42%
Total Annual Fee: 0.95% for 2007.

All in all, the fine print is not too bad. However, like most small and mid cap mutual funds, New Alternatives will have some risk attached, as it tracks the market fairly closely. It has an over 20% standard deviation for it's 10 year track record, which is right in line with the S&P. When I spoke to them about their management strategies, it was clearly a mish mash of technical and "subjective factors" (which is code for "gut"). My big takeaway when doing my due diligence was this: if New Alternatives has historically more or less tracked the market, and they employed industry standard investment strategies, why would I need to invest irresponsibly to get results?

The argument against green and socially responsible investing has been that you give up profit since you limit your asset pool. If that were true, shouldn't a majority of global mid and small cap funds outperform New Alternatives and others like it? Then why isn't it true? Ultimately, when given the choice between a basic small or mid cap mutual fund that invests "irresponsibly" and a fund that invests with sustainable energy as its focus, if they both perform similarly, why not be responsible?

Such is not to say that all managers are created equal, but if the historical returns are the same, it can often come down to combination of investment style and intangibles (the "I like Joe in investor relations" argument).

As the elder states(wo)men of green energy investing, New Alternatives is definitely worth a look. Their asset pool is pretty specifically defined in the prospectus as investing in solar, wind, hydro, geothermal, biomass, fuel cells, hydrogen, and energy conservation/enabling technologies. That's a lot of tech in there, with some recycling thrown in, so expect some decent volatility. In my opinion, the little things can be as telling as the overall investment strategies. For instance, New Alternatives send out quarterly reports and paperwork on recycled and post consumer paper. The reports are typically one color simple text reports, minimizing the "flare" and substituting well thought out, substantive reports. It's a clear sign that, despite having over $300M under management, they haven't lost their grassroots appeal. It is definitely worth a look.

NALFX is currently in my asset pool, and in the interests of disclosure, and I currently own shares personally. PLEASE READ THE PROSPECTUS BEFORE INVESTING. Though I may own and use this asset in my portfolios, it may not be the correct fund for your individual situation, so this post is by no means a recommendation that you purchase. Please read the prospectus in full before choosing to invest.


* - Thanks Gregory for being sure I keep my ridiculous malapropisms to myself!