Terror Tactics

Should you de-bin Laden your portfolio?

A new set of terror-free stock indexes launched today by London's FTSE helps answer that question for investors wanting to clean up their holdings.

The products were launched in response to a growing number of private and public investments funds in the U.S. which are prohibited from investing in companies that do business in Iran, Sudan, Syria and North Korea.

The FTSE says it identified 239 companies with ties to one of the four nations, but the British indexer won't say which ones, making a direct comparison tricky. (The majority of the screened-out companies have ties with Iran.) It does, however, provide a list of the 10 biggest companies in its Terror-Free All-World ex-US index.

Comparing these companies to the 10 largest companies flagged by the S.E.C. for having businesses in rogue nations -- a list which the S.E.C. later retracted -- it turns out that, since 2007, terror-full investing was more profitable:

- The stocks of the 10 largest terror-free companies -- which include Vodafone, Gazprom, Novartis, Telefonica, E.ON, Daimler, Anglo American, Suez, China Mobile, and Petrobras -- lost 5 percent since the start of 2007.

- The stocks of the 10 S.E.C.-flagged companies -- which include ABN Ambro, Banco Bilbao, BP, ConocoPhillips, Eni SpA, HSBC, Mitsubishi UFJ, Nokia, Royal Dutch Shell, Siemens, and Total -- gained 10 percent.

But the FTSE argues that investors putting money into index funds aren't looking for short-term returns. And, over a longer time horizon, the returns from terror-freedom are on par with that of terror-full stocks. Average annual returns over the past three years for the two versions of the All World-ex US index were both about 17 percent, the company says.

And that's not too shabby when compared with other types of socially responsible investing. According to data from the Social Investment Forum, the terror-free index's return beats that of all other socially motivated funds, which are typically motivated by liberal political beliefs.

And given that terrorism is a Republican issue, ethical investing may be the only area where the Grand Old Party is out in front these days.

Add Your Comment

Report Abuse

Archive

Categories

Links