A Mutual Fund That's Kind to Animals

The 12-year-old (IGIAX Quote)Integrity Growth and Income Fund (IGIAX) recently began marketing itself as a socially responsible fund in an effort to capitalize on the growing popularity of ''green'' investments.

The fund's name hasn't changed -- the "Integrity" moniker alludes to its sponsor, Integrity Mutual Funds(IMFD.OB Quote) of Minot , N.D.

Neither has the fund's strategy. Manager Robert Loest says he has always run it as a socially responsible fund; it's just that not many people knew. And with just $46 million in assets, it made sense to change the prospectus to better reflect his investment strategy -- and incidentally, attract more investors.

After years as a kind of investment backwater, socially responsible funds are finally having their day in the sun. Partly it's in response to a greater cultural awareness of issues such as global warming. Even those who don't believe global warning exists can't deny the need for alternative energy sources as the country's dependence on foreign oil continues to deplete their disposable income.

And as funds take a more activist role in corporate governance, investors realize that where they put their money can foster change, particularly on issues such as the environment and alternative energy.

Over the past 10 years, assets in socially responsible bond and equity funds have surged 828% to $40.1 billion from $4.8 billion. By comparison, total assets in mutual funds of all kinds have risen 260% to $10.9 trillion.

Socially responsible funds may also be shedding their reputation for lackluster returns. In the past, they have lagged the overall market, in part because they use additional screens, which tend to inflate costs. For the year ended June 11, 82 equity funds following a social-criteria strategy returned an average 19.06%, compared with 22.79% for the S&P 500, according to fund tracker Lipper. And over the past five years, socially responsible funds have returned an annualized 9.5%, compared with 10.27% for the S&P 500.