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Utopia Fund Manager Follows His Gut

Gregg Greenberg

Fund manager Paul Sutherland uses a Zen philosophy on behalf of his investors.

"The key elements of balance and finding your spiritual center are vital to your understanding of money," says Sutherland, author of "Zenvesting" and founder of the Utopia Funds. "Like food, water, warmth and touch, money is part of our lives. View it like energy."

Of course, there are positive and negative energies, just like there are gains and losses on Wall Street.

So far, Sutherland has avoided the bad karma associated with bad investments by carefully managing risk, keeping a close eye on valuation and effectively mixing stocks, options and bonds to smooth out returns. The four Utopia funds he introduced in 2005 -- Growth, Core, Yield Income and Core Conservative -- are beating their Morningstar peers and are doing it with less volatility. They carry an expense ratio of 1.4%.

"We have no market cap, country or valuation constraints when we invest," says Sutherland, whose assets now top $750 million in both separate accounts and mutual funds. "You have to be a global manager now. That means willing to keep an open mind."

His mind may be open to investment ideas, but his portfolio is closed to companies that manufacture products or services that "hurt people" including alcohol, tobacco and pornography.

"I would not call it a 'negative screen', just common sense," says Sutherland. "I have a 17-year-old daughter. I'm not going to buy Playboy (PLA Quote) shares. I wouldn't feel right having it in my house, so I certainly would not want it in my portfolio."

For those looking for some reading material, Sutherland recommends picking up a copy -- or some shares -- of the Washington Post (WPO Quote), which he owns in his Utopia Core Conservative Fund (UTCCX Quote).

"It's not just a newspaper company," says Sutherland. "It has an education component, a cable business. Warren Buffett likes it for Berkshire (BRK.A Quote) but more importantly, I like it. The sum of the parts is worth $1,000 and its trading at $600."

He also owns energy giants BP (BP Quote) and Shell (RDS.B Quote) in this particular fund, a pair of holdings that seems to run counter to his holistic, earth-friendly beliefs.

"These are energy, not oil, companies," Sutherland maintains. "They are also investing in alternative energy and natural gas. Furthermore, oil is not evil in its own right. We need and use oil."

He also owns Australian wind stocks like Babcock and Brown and Viridas, as well as telecom powerhouses Verizon(VZ Quote) and Deutsche Telekom(DT Quote)

His Utopia Yield Income Fund (UTYIX Quote) is geared for investors looking for long-term consistent income. It currently yields 2.7% and Sutherland says he manages it so it has the same peak-to-trough risk as a long-term government bond.

Aside from high-yielding stocks like AT&T(T Quote), the fund holds Ireland-based conglomerate Independent News and Media.

"They have a 6% yield in euros," says Sutherland. "Plus they have big exposure to India, Indonesia and South Africa. They own newspapers, and while newspapers have their trouble in developed countries, they are still the way people get their information in less developed lands."

Sutherland says he is worried about inflation because of the trade deficit, loose money supply and the war in Iraq. As a result, he is obsessed with owning high-yielding stocks.

But will the war drive a Zen-master to own defense stocks?

"It's not really an issue because defense companies are bad businesses anyway," says Sutherland. "Contracts are pulled apart by Congress so weapons can be manufactured in different states. Do you want Congress making manufacturing decisions for your company?"

Peace out.