For Meyers Fund, Deal Means More Visibility
Meyers Pride Value, a small Beverly Hills-based “socially directed” mutual fund that invests solely in gay-friendly companies, is about to have a coming-out party of sorts.
Meyers Pride is being sold to Citizens Advisers Inc., one of the oldest money managers in the socially directed investing business, in a move expected to help the $15-million no-load fund expand its distribution.
“Citizens gets a broader menu of products, and we get to focus on what we do best--managing money,” said Shelly J. Meyers, who has led the now-5-year-old fund to a top performance rating by fund tracker Morningstar Inc. Her firm, Meyers Capital Management, which also invests $20 million for wealthy individuals and small profit-sharing plans outside of the fund, isn’t part of the sale.
The purchase will diversify Portsmouth, N.H.-based Citizens’ no-load fund lineup by adding a “value”-oriented portfolio, a relative rarity in the socially screened world, where more funds have a growth-oriented focus.
Meyers’ fund, which invests only in companies that have written policies against discrimination based on sexual orientation, is believed to be unique for its targeted screen. It will employ a broader social screen under the Citizens banner, a move Meyers says she welcomes. She feels passionately about several issues highlighted in Citizens’ array of social criteria, including animal testing and the environment.
Meyers Pride will become Citizens Value Fund pending a vote by Meyers shareholders and approval from the Securities and Exchange Commission, perhaps by late September. Citizens is retaining Meyers and her firm as the fund’s advisor, at least for five years.
Whether measured against other socially screened funds or against Morningstar’s mid-cap value fund universe, Meyers Pride has been a strong and steady performer.
Among the 51 socially directed funds in Morningstar’s universe (those with minimum five-year histories), Meyers’ five-year average annual return of 18.3% ranks it third.
The fund also ranks in the top 5% of all mid-cap value funds for the year to date, and in the top 20% for the last five years, Morningstar said. So far in 2001, Meyers Pride is up about 16%, while the blue-chip Standard & Poor’s 500 index is down nearly 10%.
Bigger Opportunities for ‘a Little Shop’
Meyers said the snickers she heard when she launched the fund in June 1996 are long gone.
“I don’t care what kind of a fund you are; in this business, if you don’t have performance, you’re dead,” she said.
Financial advisors and individual investors who weigh five-year records appear to be giving the fund a closer look, and joining the Citizens lineup will bring new marketing muscle, Meyers said.
“The acquisition could make it much easier for people to find the fund,” said Morningstar analyst Catherine Hickey in Chicago. “It’s tough these days for a little shop like Meyers to get out there.”
Citizens, founded in 1982, manages $1.7 billion for individuals and institutions.
Meyers will continue to use the equal-rights-protection screen to find potential investments, she said. Her proprietary database has grown from about 225 acceptable companies in 1996 to 450 now, she said.
Meyers is proud of whatever attention her fund has helped bring to the issue of gay rights.
“It may not be the equivalent of Mt. Kilimanjaro erupting, but we’ve had an impact,” she said.
Yet 38 states have no legal workplace protections for gays, Meyers said. Twelve states, including California, have such laws.
“If you’re over 40 and you’re fired, you’re in court the next day. If you’re black and you’re fired, you’re in court the next day,” Meyers said. “This is the last group to have legal protections.”
But the 42-year-old Michigan native, a certified public accountant with an MBA from Dartmouth, cringes when her fund gets pigeon-holed because of the gay-rights screen.
“This is an old-fashioned value fund that focuses on good stock picking,” Meyers said. “Passing the [nondiscrimination] screen just gets you on the list,” she said.
Investment decisions are then based strictly on fundamental analysis. Meyers, who worked for the value-oriented money manager Boston Co. before setting up her own shop, looks for stocks selling for less than what she considers their intrinsic worth, based on factors such as expected cash flow.
Many investors ignore companies’ employee relations in choosing stocks, Meyers said, but the gay-rights screen makes sense financially as well as politically, she believes.
“Companies that value all their employees are going to have a huge advantage in the 21st century,” Meyers said. “The economy is 80% service-based--your main asset goes in and out the door every day, even though it’s not on the balance sheet. An environment of tolerance, where people don’t have to hide things, fosters teamwork, creativity and productivity.”
Meyers, who limits the fund portfolio to roughly 40 stocks to avoid watering down her best ideas, looks for a growth catalyst as well as a cheap valuation when sizing up a stock, she said.
Purchases in the last few months have included AOL Time Warner (ticker symbol: AOL), which she bought in the mid-$40s when her analysis of the conglomerate’s pieces indicated the stock was worth $65 a share. She sees signs of a bottom in the advertising market, which could bolster the company’s magazine business. The stock closed Friday at $44.30.
Meyers also recently bought shares of Bay View Capital (BVC), a San Mateo, Calif., bank holding company whose new management team has gotten bad loans off the books and sold peripheral businesses, she said, and clothing retailer Limited Inc. (LTD), which Meyers expects to benefit in the short run from income tax rebate checks now landing in consumers’ mailboxes, and in the long run from the leadership of Chief Executive Leslie Wexner.
Meyers expects to have a larger investment universe to pick from once her stock screen is combined with Citizens’ screens, which eliminate companies involved in tobacco, weapons, gambling and nuclear energy and assess such things as management diversity. The research done by Citizens’ bigger staff may lead her to unfamiliar firms that pass muster on gay rights as well, she said.
Meyers, who shares her Glendale house with three cats and two dogs, is most eager to add animal testing to the mix of screens.
From a marketing standpoint, Meyers expects the fund’s broader social mandate to appeal to investment advisors and their clients.
“Some of the advisors I’ve talked to thought our screen was too narrow, so their response to the deal has been positive,” she said.
Citizens’ Entree to the Gay Market
Bill Sileo, Meyers Capital’s marketing director, said that although the fund has been selling better than ever since passing the five-year mark, joining Citizens could bring it to a new level.
“Our base is in the gay and lesbian community, but beyond that a lot of potential lies,” he said. “We should be inclusive, just like the companies we want to invest in. This is a fund for everyone.”
For Citizens, the purchase not only provides a ready-made value fund, but also entree to the gay market, which it had not actively developed. And the current slump in aggressive funds such as Citizens Emerging Growth (down 42% in the last year) has spotlighted the need for a wider lineup at Citizens, Morningstar’s Hickey said.
Meyers said there are still myths about socially directed investing that she hopes to help dispel.
“There is a misperception that we’re more limited than everyone else in our investment choices,” she said. “Well, very few managers anywhere have carte blanche--they’re either limited by style, capitalization, industry or geography.”
Worst of all, she said, is the notion that socially directed investing can’t yield big returns.
“We’re not doing this because we’re goody-goody,” Meyers said. “When I get up in the morning, what gets me going is that I want to beat the market. There’s an incorrect perception that you’re giving up investment returns, and that’s something I want to change, big time.”
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Proud of Its Record
Meyers Pride Value has one of the top five-year records among socially screened mutual funds, according to Morningstar Inc. Returns are through Thursday.
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Morningstar 5-year return Socially screened fund category (annualized) YTD return Ariel Appreciation MB +19.8% +10.1% Parnassus MB +19.4 +3.9 Meyers Pride Value MV +18.3 +15.8 Ariel SB +17.9 +5.8 GMO Tobacco Free Core III LV +16.7 --5.8 Amana Growth LG +15.5 --16.4 Green Century Balanced SG +14.8 --16.2 Calvert Social Investment Equity LB +14.5 --3.1 Calvert Large Cap Growth LG +14.4 --16.8 Citizens Emerging Growth MG +14.3 --30.2 S&P; 500 index +14.0 --9.7
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Categories: MB=mid-cap blend; MV=mid-cap value; SB=small-cap value; LV=large-cap value; LG=large-cap growth; SG=small-cap growth; LB=large-cap blend; MG=mid-cap growth.
Source: Morningstar Inc.
