FOR IMMEDIATE RELEASE, March 18, 2008 -- Pennyfarthing Investment Management, L.L.C., an independent investment adviser and newsletter publisher, today announced that it has launched a critical examination of the socially responsible investment (SRI) mutual fund industry, to be posted as a collaborative effort. A diversity of perspectives, opinions and further analysis are welcome.

The forum will be moderated according to civil terms of discussion. Contributors should distinguish between opinions and facts, with links to sources integrated within their comments.

For too long, the portfolio management of SRI mutual funds has not agreed with their marketing. “If the SRI industry were a corporation, it wouldn't qualify in a rigorously screened portfolio,” stated the environmentalist Paul Hawken who authored a critical report Socially Responsible Investing, published by the Natural Capital Institute in 2004. “The SRI industry needs to change. While SRI investors call for corporate transparency, the industry is closed, proprietary and secret.”

For more, see our press release announcing the launch of

Wednesday, January 27, 2010

Why did the U.S. SEC find that the Pax World funds engaged in fraudulent and deceitful practices, making bogus claims and misleading shareholders?

Only recently concluded was litigation concerning a Pax World portfolio manager, since departed, who created fictitious notes to document investment committee meetings that never occurred. The scheme was concocted to fool the SEC in an examination conducted six years ago.

As disturbing was the fact that the previous summer the SEC concluded a long-running, broader investigation of Pax World and found the fund group to have made untrue statements of material fact by misrepresenting that it adhered to the social and environmental restrictions set forth in its published materials. In plain language, the Pax World funds purchased and held stocks that its own prospectus and advertising prohibited it from buying.

Due to its failure to conduct due diligence, the Pax World funds invested in defense-related stocks as well as corporations that violated acceptable thresholds for environmental and labor standards, or that were involved in businesses related to alcohol and gambling. The penalty was a $500,000 fine levied by the SEC, sizeable by any standard.

Perhaps one should not then be surprised that Pax World asked shareholders’ permission to relax its social and environmental restrictions, which ignited significant shareholder dissent in 2006. Pax World assured shareholders that it was doing so in order to “clarify and strengthen the Fund’s commitment to promote peace, protect the environment, advance equality and foster sustainable development around the globe,” giving no hint that an SEC investigation of it was in full swing behind the scenes, regarding its past failures to properly screen investments. Did we forget to mention that?

And even before the SEC made their allegations public, reported earlier in 2008 on the fact that shares in the defense contractor AECOM Technology had been purchased by the Pax World funds. The business of AECOM spans a host of war-related activities, from managing the U.S. Army’s Fort Polk, including its live-fire target ranges, to operating logistics, training and repair depots for the U.S. military in Iraq, Kuwait and Afghanistan, with more than 6,000 employees working for its CSA subsidiary in Kuwait alone, to operating the Nevada Test Site, the focal point for the Department of Energy’s nuclear weapons research program. They are no-bid defense contractors repairing and maintaining everything from machine guns to computers to communications equipment to tanks, among other tasks. In Latin, the word Pax means ‘peace’, which remains of vital interest to many shareholders and a fact that is still boasted about in its communications with shareholders. Thankfully, AECOM is no longer held by the Pax World funds (but it is a current holding among many of the Calvert funds).

Yes, anyone might make a mistake, but so many in so short a time across so many facets of investment management? And remember, changes were made at Pax World only after third-parties such as and the SEC called them to account.

Monday, January 18, 2010

Why are the Calvert funds pressuring corporations on executive pay when Calvert itself doesn't tell its own mutual fund shareholders how much Calvert executives take home?

The Calvert mutual funds have long and strongly pressured corporations to be accountable with regard to how much they pay their executives. They’ve lobbied the SEC to require full disclosure of executive pay and supported efforts in Congress to mandate an annual shareholder vote on such matters. However, does Calvert itself tell its own mutual fund shareholders how much Calvert executives take home? Nope, that’s secret. When I asked Calvert's director of communications why, it appeared they might never have been asked this question before. When you think about the Calvert funds’ high expense ratios in combination with an unwillingness to disclose their own executives’ pay, it makes you wonder....