Few Investors Can Smell the Smoke in Their Funds

Few investors know if their mutual funds invest in tobacco stocks, but a majority would favor a smoke-free fund, according to a survey released Tuesday.

The survey by Yankelovich Partners polled 800 investors in early October. Two out of three couldn’t say if their fund holds tobacco stocks, but almost as many--59%--said that they would be more likely to invest in a smoke-free fund.

Individuals in a work-based retirement savings plan, such as the popular 401(k), may not have a smoke-free investment alternative available to them, however.

Just 16% of investors with an employer-sponsored retirement savings plan now have the option of investing in a tobacco-free, socially responsible mutual fund, the survey found.

Interest is strong, though, as 78% of those polled said they would invest in such a tobacco-free alternative fund if it were offered.

Employers “would be well-advised to respond to this pent-up demand for socially responsible alternatives among the funds they offer in retirement investment programs,” said Clifton Sorrell, president and chief executive of the Calvert Group, a fund management firm based in Bethesda, Md., that sponsored the survey.

“We’re not telling people what to invest in,” just helping them to make “informed choices” when investing in mutual funds, Sorrell said.

Fidelity Investments and Vanguard, the two largest mutual fund companies, have significant holdings in Philip Morris Cos., the world’s largest tobacco manufacturer. About 108, or 3.8%, of the 2,775 funds tracked by Morningstar Inc. have kept at least 5% of their assets in tobacco stocks.

Philip Morris issued a statement saying investment decisions should be based on financial considerations.

“We believe that pension fund managers have a fiduciary responsibility to manage their portfolios to produce the best financial returns for beneficiaries,” the tobacco company said.

The Calvert Group and the Investor Responsibility Research Center also unveiled a new Web site that allows users to research mutual funds’ investments in tobacco, at https://www.calvertgroup.com