Most investors are probably familiar with mutual funds that invest in hard assets like real estate, natural resources or precious metals. Most investors are probably also familiar with the "socially responsible" mutual fund sub-genre, whereby the fund analyzes a public company's compliance with social and ethical responsibilities before investing. Well, how about a mutual fund that follows both of these guidelines?

IN PICTURES: 20 Tools For Building Up Your Portfolio

A fund that mixes both hard asset investing and socially responsible investing is the brainchild of Steven Mandis, the founder of SGM Funds. The fund is called the SGM Hard Asset Fund, and it has as its objective the long-term growth of capital.

Mandis is a veteran of Goldman Sachs, and Halycon Structured Asset Management, where he served in various functions, including Portfolio Manager and Chief Investment Officer. Mandis is also a value investor and looks for companies with strong balance sheets and high free cash flow yields. (Learn about the components of the statement of financial position and how they relate to each other in our article, Reading The Balance Sheet)

The Specs
The fund will invest in companies that get at least 50% of its revenues or profits from hard assets or has at least 50% of its assets in "tangible" hard form.

When considering the social responsibility issue of investments, the fund considers a range of issues based on environmental, social and corporate governance principles. These include respect for the environment and indigenous peoples, the ethical treatment of animals, timely disclosure and respect for the rights of investors. The fund also screens out the typical "sin" stocks that are involved with alcohol, gambling, tobacco or armaments.

The Fund So Far
The fund began operations on February 27, 2009 and has returned 8.2% through the end of May 2009. While this lags the return of the S&P 500, the fund's benchmark, there are two mitigating factors. First, value investing is a long-term game, and typically takes more than three months to come to fruition. Second, a three-month track record is too short a period of time to judge any investment manager.

The fund currently has some interesting positions. As of the end of May 2009, the fund has written put options on a range of different companies. The top five are:

  1. Petroleo Brasileiro (NYSE:PBR), the Brazilian oil company
  2. SPDR Gold Shares (NYSE:GLD), an exchange-traded fund (ETF) that attempts to track the price of Gold Bullion.
  3. Potash Corp (NYSE:POT), which makes fertilizer and feed products
  4. Amerada Hess (NYSE:HES), an oil company
  5. XTO Energy (NYSE:XTO)

This strategy allows the fund to collect premium on the contracts that are written, and get a favorable price if and when they are exercised.

The Bottom Line
Hard assets and socially responsible investing are not mutually exclusive, as Steve Mandis at the SGM Hard Asset Fund is set to prove. This will be an interesting fund to track during the upcoming economic recovery. (Read Go Green With Socially Responsible Investing for a related reading.)

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: Vanguard Total World Stock

    Learn about the Vanguard Total World Stock exchange-traded fund, which invests in stocks located in numerous countries with a high level of diversification.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  3. Mutual Funds & ETFs

    ETF Analysis: BioShares Biotechnology Products

    Learn more about the BioShares Biotechnology Products fund, an exchange-traded fund that is focused on producers of FDA-approved drugs.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR EURO STOXX 50

    Learn about FEZ, the Euro Stoxx 50 ETF. FEZ tracks the 50 largest companies in Europe, making it the Dow Jones Industrial Average of Europe.
  5. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraShort Nasdaq Biotech

    Learn more about an innovative inverse-leveraged sector exchange-traded fund, or ETF, the ProShares UltraShort Nasdaq Biotechnology fund.
  6. Chart Advisor

    Value Stocks Offer Stability in a Volatile Market

    With volatility on the rise, investors are turning to segments of strength such as value stocks. We'll take a look at several ETFs that could be worth a closer look.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: First Trust Tactical High Yield

    Find out more about the First Trust Tactical High Yield fund, a debt security-focused ETF designed to produce high income.
  10. Mutual Funds & ETFs

    ETF Analysis: Market Vectors EM High Yield Bd

    Learn more about the Market Vectors Emerging Markets High Yield Bond ETF, a fund dedicated to subinvestment grade foreign debt issues.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Security

    A financial instrument that represents an ownership position ...
  3. Series 6

    A securities license entitling the holder to register as a limited ...
  4. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  5. Board Of Directors - B Of D

    A group of individuals that are elected as, or elected to act ...
  6. Strike Width

    The difference between the strike price of an option and the ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!