Comments on: Socially Responsible Pension Fund Options?

Question: Socially Responsible Pension Fund Options?

ericbop — Wed, 09 Apr 2008 13:29:02 -0800

My union offers its members a pension plan that allows its participants to allocate their investments in several types of funds (large cap, small cap, money market, etc). How can I convince my association's pension plan fund manager that they can offer a socially responsible fund as an additional option without violating their fiduciary responsibility?

By: hal_c_on

hal_c_on — Wed, 09 Apr 2008 13:35:42 -0800

More information needed. Why would the manager automatically assume that it is violating their responsibility? Also, just for me, personally...what socially responsible fund are you referring to?

By: ericbop

ericbop — Wed, 09 Apr 2008 13:40:35 -0800

Either because the fund manager is a conservative a-hole, or because he truly believes that these funds aren't up to the standards of other mutual funds (which is entirely false, but I can't get him to see that, hence option A). I guess what I'm looking for are some real-world examples that I can point to of union pension funds that have socially responsible options. Alternately, any fancy official investor publications with articles to this effect that I could cite might be helpful, too.

An example of a an SRI fund that Fidelity (our pension provider) offers is Spectra Green Fund (SPEGX).

By: Perplexity

Perplexity — Wed, 09 Apr 2008 13:46:23 -0800

I found some potentially helpful resources here. (Especially in the "Industry Related Reports" section, like "Defined Contribution Plans and Socially Responsible Investing in the United States (2007)" and "Resource Guide for Plan Sponsors: Adding a Socially Responsible Investment Option to Your DC Plan (2007)".

By: Avenger

Avenger — Wed, 09 Apr 2008 14:04:36 -0800

Can you purchase ETF's through your pension plan? There are quite a few alternative-energy ETFs (GEX, PBW for starters) that have alot of potential and are probably good buying opportunities.

By: pandanom

pandanom — Wed, 09 Apr 2008 14:05:12 -0800

ericbop is right that many have doubts as the soundness of such funds. The duty of a pension manager is to increase shareholder value. The idea of a fund that deliberately eschews certain investments for non-financial reasons is a questionable one in the minds of some.

Assuming the manager is skeptical for this reason, you have to show him documented profitability that's competitive with other potential choices. He's not doing his job if he agrees to offer a "responsible" fund that's unprofitable.

By: Salvatorparadise

Salvatorparadise — Wed, 09 Apr 2008 14:10:54 -0800

or even less profitable, i'd argue

By: b1tr0t

b1tr0t — Wed, 09 Apr 2008 18:46:09 -0800

I can't recommend any specific funds, but you may want to do some research on John Doerr, of KPCB. Mr. Doerr is a strong advocate of socially responsible investing, particularly in education and green technology. He has also been fantastically successful at traditional venture capital investment (funding companies including Netscape, Sun, Google and Amazon).

I don't know that KPCB will offer options relevant for your pension program, but Doerr speaks frequently (several on google video or youtube) and is extremely well respected in the technology and financial industries.

The right investment vehicle may be an ETF as others have suggested, but Doerr might help you make the argument.

By: bananafish

bananafish — Thu, 10 Apr 2008 12:21:39 -0800

My best advice would be to write a detailed letter with supporting documentation about the history of the fund you wish to add as an option. Also request a meeting with the Trustees -- though don't expect them to grant the request.

The type of plan your describing is established under 404(c) of ERISA -- the main fiduciary requirement for this type of fund is (1) proper education of plan participants and (2) sufficient diversification of investments. You should inform the trustees that this type of fund will reduce risk by increasing diversification.

It might also help if you can identify other union members who are interested in this type of fund. The Trustees are more likely to respond if there is a high level of interest.