The Outside Portfolio
Mutual Funds

By Nelson D. Schwartz

THE OUTSIDE PORTFOLIO:
When the Giant Sequoia Talks, People Listen
Stocks
Mutual Funds

During the enviro-chic days of the early nineties, buying an environmentally conscious mutual fund was a one-way ticket to Suckersville. Not anymore. New funds, led by managers who are committed to beating benchmarks like the S&P 500 despite the self-imposed handicap, have given green investors a level playing field. The following recommendations should help you create a diversified portfolio of large- and small-cap stocks, bonds, and international investments.

GREEN CENTURY BALANCED (800-934-7336)
LOAD: None
RETURNS: 12-month,19.09 percent; three-year annualized, 20.72 percent
MINIMUM INITIAL INVESTMENT: $2,000
EMPHASIS: U.S. Small- and Mid-Cap Stocks, Bonds
Since taking over the fund three years ago, manager Jackson Robinson has sharply improved its performance. In 1996 it was, according to mutual-fund rating service Morningstar, the best-performing fund in its category. Split 75/25 between stocks and bonds, it's also one of the few funds that actively looks for companies engaged in environmentally responsible businesses, rather than merely screening out inappropriate investments. "We're proactive," says Robinson. "We want companies that are part of the solution."

CITIZENS GLOBAL EQUITY (800-223-7010)
LOAD: None
RETURNS: 12-month, 19.91 percent; three-year annualized, 15.56 percent
MINIMUM INITIAL INVESTMENT: $2,500
EMPHASIS: U.S. and International Stocks
One of only a handful of green international funds, Citizens Global Equity has consistently whupped its competition. At least 50 percent of the fund's assets are invested outside the United States at all times-but no more than a quarter of that is invested in emerging markets, making this fund a good choice for conservative investors looking for overseas exposure.

CITIZENS INCOME (800-223-7010)
LOAD: None
RETURNS: 12-month, 10.48 percent; three-year annualized, 10.78 percent
MINIMUM INITIAL
INVESTMENT: $2,500
EMPHASIS: U.S. Investment-Grade Securities
Citizens Income isn't one of the market's best socially conscious bond funds. It's one of the best bond funds, period, having outperformed 86 percent of its peers last year. For folks seeking a combination of interest income and price appreciation, this one's a no-brainer.

CRUELTY FREE VALUE (800-662-9992)
LOAD: None
RETURNS: 11.84 percent since June 1, 1997
MINIMUM INITIAL INVESTMENT: $250
EMPHASIS: U.S. Small- to Mid-Cap Stocks
This unique fund has been around for only ten months, but its returns thus far suggest that portfolio manager William Coughlin has things wired. As the name suggests, Cruelty Free Value avoids companies that engage in animal testing or otherwise harm animals. Right now, the fund is dominated by small-cap financial and technology companies.

DOMINI SOCIAL EQUITY (800-762-6814)
LOAD: None
RETURNS: 12-month, 36.02 percent; three-year annualized, 30.85 percent
MINIMUM INITIAL INVESTMENT: $1,000
EMPHASIS: U.S. Large-Cap Stocks
Think of this index fund as a PC version of the S&P 500. It tracks the Domini 400, a collection of socially screened companies that have outperformed the market for the last seven years, with the type of low-risk blue-chips that can keep you from getting the hives. Not to say you should put all of your eggs in this basket, but it's a helluva place to store half a dozen.

NO, NO, NO THANKS Steering clear of the anti-funds

Maybe it's unfair to pick on the worst green mutual funds. After all, they stink no worse than the hundreds of bad traditional funds also littering the market. With these, however, there's a particularly bitter irony, namely that such conscientious fund managers are looking out for everybody except their own long-suffering shareholders. Rightime Social Awareness. Right time? Hardly. Last year was miserable for this underperforming fund, as 96 percent of similar growth-and-income portfolios turned in better performances. Green Century Balanced, which invests in the same types of securities as Rightime, managed to do more than twice as well in 1997. Bridgeway Social Responsibility. It's bad enough that this fund squanders your potential profits via high expenses. But it was also beaten by nearly 80 percent of its rivals over the last three years. Things improved a bit in '97, yet Bridgeway still managed to finish among the bottom 40 percent of its group. New Alternatives Fund. Suffice it to say that there are plenty of better, well, alternatives to this veteran loser. Not only does it rank in the bottom 10 percent of its class for the last one-, three-, and five-year periods, but management also has the gall to impose a 4.75 percent sales charge just to get into the fund. We'll get right back to you.

Illustrations by Jason Schneider