The wages of sin catching up with the Vice Fund v. S&P 500

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Source: VICEX USA Mutuals Barrier Investor Fund VICEX Quote Price News.

The Vice Fund is now known as the Barrier Fund because it extended out of sinful stocks into industries with high barriers to entry. Minimum Investment is $2,000.

image The Barrier Fund primarily invests in the following industries: Aerospace/Defense, Gaming, Tobacco and Alcoholic Beverages. These four industries were chosen because they demonstrate one or more of these compelling and distinctive investment characteristics:

  1. Natural barriers to new competition
  2. Steady demand regardless of economic condition
  3. Global Marketplace – not limited to the U.S. economy
  4. Potentially high profit margins
  5. Ability to generate excess cash flow and pay and increase dividends

.

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How did the Vice Fund end the year?

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The Vice Fund is a mutual fund investing in companies that have significant involvement in, or derive a substantial portion of their revenues from the tobacco, gambling, defence/weapons, and alcohol industries. A primary focus of stock selection is the ability to pay and grow dividends.

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Has ethical investing ever beaten the market? @GreenpeaceNZ

VFTSX is the Vanguard social investing index fund – a fund that invests in an index made up of ethical investing funds.image

Source: VFTSX Vanguard FTSE Social Index Inv Fund VFTSX Quote Price News.

Has the Vice Fund ever not outperformed the share market?

The Vice Fund is a mutual fund investing in companies that have significant involvement in, or derive a substantial portion of their revenues from the tobacco, gambling, defense/weapons, and alcohol industries. A primary focus of stock selection is the ability to pay and grow dividends.

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Source: VICEX USA Mutuals Barrier Investor Fund VICEX Quote Price News.

Does ethical investment pay? @JulieAnneGenter @jamespeshaw @RusselNorman

The Vanguard Investment Fund has set up an passive investment index to invest in ethical investments. No flies on them regarding entrepreneurial alertness.

The drawback of ethical investing is the higher management expenses to administer negative screens (to eliminate arms manufacturers and other frowned upon activities) and positive screens (to favour businesses with a good record on corporate social responsibility or that are involved in low-carbon industries etc.)

An index-linked passive fund allows socially conscious investor to have a diversified ethical portfolio at least cost. Vanguard pitches its ethical investing passive fund thus

Some individuals choose investments based on social and personal beliefs. For this type of investor, we have offered Vanguard FTSE Social Index Fund since 2000.

This low-cost fund seeks to track a benchmark of large- and mid-capitalization stocks that have been screened for certain social, human rights, and environmental criteria.

In addition to stock market volatility, one of the fund’s other key risks is that this socially conscious approach may produce returns that diverge from those of the broad market.

The expenses ratio of this index linked passive fund for socially conscious investors is 0.25%. The usual investment expenses ratio of a Vanguard Fund is 0.1% which is much less than that of active funds.

As is well known, ethical investing offers a poorer return on standard diversification strategies as the chart below show.

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Source: The case against socially responsible investing (SRI) – Flannel Guy ROI.

Virtue must be its own reward because it does not pay off in the share market

As you can see value of $10,000 at the end of 10 years would be worth almost $24,000 with the total stock market ETF but only about $20,000 with the FTSE social index.

The initial reaction is that $4,000 over 10 years isn’t that big of a deal, but there are two things to point out.  First, that $4,000 difference is worth almost half the initial investment!  Secondly, on a compound annual basis, the SRI fund returns about 2% less than the total stock market fund.

Does ethical investing pay? Barrier Fund and Ave Maria Catholic Values Fund head to head

Virtue is not its own reward if you invest in the Ave Maria Catholic Values Fund which is AVEMX in the head-to-head comparison with the Barriers Fund, formerly the Vice Fund. The Ave Maria Catholic Values Fund return since inception was 5.63% as compared to the 9.95% return of the Barrier Fund.

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Source: VICEX – USA Mutuals Barrier Fund Investor Class Shares Mutual Fund Quote – CNNMoney.com

The S&P index grew by 8 .34% since the inception of the then Vice Fund, now the Barrier Fund. Such is the price of risking of going to hell if you lose Pascal’s wager by investing in tobacco, alcoholic beverage, gaming and defence/aerospace industries.

All of the equity investments (which include common stocks, preferred stocks and securities convertible into common stock) and at least 80% of the net assets  of the Ave Maria Catholic Values Fund is invested in companies meeting its religious criteria as  the fund manager explains

Morally Responsible Investing (MRI) is a subset of socially responsible investing, which often screens out companies engaged in environmental issues, tobacco products, alcohol, nuclear power, defense, oil and “unfair” labor practices. MRI is different in that it screens out companies engaged in activities that are not pro-life or pro-family… 

All investments are screened to eliminate any company engaged in abortion, pornography, embryonic stem cell research, or those that make corporate contributions to Planned Parenthood

Traditional ethical funds use negative screens (to eliminate arms manufacturers and other frowned upon activities) and positive screens (to favour businesses with a good record on corporate social responsibility or that are involved in low-carbon industries etc).

The Vice Fund (now the Barriers Fund) continues to outperform S&P 500

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Source: VICEX – USA Mutuals Barrier Fund Investor Class Shares Mutual Fund Quote – CNNMoney.com

The Vice Fund has outperformed the S&P 500 since 2004 as shown by the green line. This mutual fund invests invest in sinful stocks as its managers describe it:

Designed with the goal of delivering better ​risk-adjusted returns than the S&P 500 Index. It invests primarily in stocks in the tobacco, alcohol, gaming and defence industries. Vice Funds believes these industries tend to thrive ​regardless of the economy as a whole.

The Vice Fund is now known as the Barrier Fund because it extended out of sinful stocks into industries with high barriers to entry. Minimum Investment is $2,000.

The Barrier Fund primarily invests in the following industries: Aerospace/Defense, Gaming, Tobacco and Alcoholic Beverages. These four industries were chosen because they demonstrate one or more of these compelling and distinctive investment characteristics:

  1. Natural barriers to new competition
  2. Steady demand regardless of economic condition
  3. Global Marketplace – not limited to the U.S. economy
  4. Potentially high profit margins
  5. Ability to generate excess cash flow and pay and increase dividends

The Barrier Fund  believes numerous investment opportunities in these industries which have been largely overlooked by other funds.

The Fund has high management fees of 2%. Americans can buy Vanguard’s or Fidelity’s index funds and pay only 0.1% in expenses.

@RusselNorman @JulieAnneGenter a hedge fund specialises in shorting renewable energy shares @Greenpeace

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Just as the Vice Fund specialises in investing in tobacco, alcohol, gaming and defence shares, Cool Futures Funds Management is starting-up to specialise in betting against global warming by shorting green stocks:

…instead of renewables being our energy future, they’re betting on the subsidies drying up and the whole industry collapsing; instead of fossil fuels being left in the ground as “stranded assets”.

An example of the nice little earners this hedge fund can come across is anticipating when particular investors will want to disinvest from fossil fuels.

When institutional investors ranging from universities to sovereign investment funds such as the New Zealand Superannuation Fund seek to disinvest from fossil fuels, that will be a good time to buy cheap shares.The

Do vice funds out-perform the share market?

The Vice Fund has outperformed the S&P 500 since 2004. They invest in sinful stocks as its managers describe it:

Designed with the goal of delivering better ​risk-adjusted returns than the S&P 500 Index. It invests primarily in stocks in the tobacco, alcohol, gaming and defence industries. Vice Funds believe these industries tend to thrive ​regardless of the economy as a whole.

The Vice Fund was founded in 2002 to specialise in socially irresponsible stocks such as gambling, alcohol , tobacco and defence contracting. The Vice Fund is not recession proof, but did do better in the 2009 market crash.

The Vice fund also has high management fees of 2%. Americans can buy Vanguard’s or Fidelity’s index funds and pay only 0.1% in expenses. The Vice Fund  may have buckled under the heat because it has rebranded:

The Vice Fund is now called the Barrier Fund. The investment strategy and the portfolio manager have not changed… The Barrier Fund invests in companies, both domestic and foreign, within industries that have significant barriers to entry.

All is not lost, the Ave Maria Catholic Values Fund beat the market almost as handily as Vice.

To confuse further, the Catholic Values Fund revealed that it shared investments in defence contractors with the Vice Fund. The Vice Fund invested in staid Berkshire Hathaway and Microsoft.

HT: Investing in Vice.

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