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    Building a Business on SRI

    Marjorie Bennett balances her clients' values with their need for good returns.

    David J. Drucker, 05/29/2009

    We value your comments. Make your opinions known at the end of every MorningstarAdvisor.com article.

    Marjorie Bennett has seen firsthand the evolution of socially responsible investing. In the 1990s, as a vice president at Morgan Stanley, she made sales presentations to large endowment funds. "They'd ask about SRI, but institutions weren't offering such investments then," she says.

    Pickings were slim for individuals, too. In 1998, when she launched her firm, Aegis Capital Management, in Oakland, Calif., she and her clients wanted their portfolios to reflect their social values. It was a challenge because there weren't that many SRI opportunities available.

    "In the early days of SRI," Bennett says, "funds might exclude tobacco from a portfolio and call it socially responsible. It wasn't until the Domini 400 Social Index Fund came out in 1989 that the SRI industry really distinguished itself. In the 1990s, families like Calvert and Ariel started offering socially responsible investments, and even the wirehouses were beginning to take notice."

    She doesn't have the problem of finding SRI opportunities now. Big changes have arrived to SRI, mostly in the past five years. Waiting for someone to develop more SRI index vehicles, Bennett was pleased to see the Vanguard FTSE Social Index Fund VFTSX. "The fund doesn't have a great track record, but at least it lowered expenses and turnover," she says. She also says that the two funds brought out by iShares--iShares KLD 400 Social Index DSI and iShares KLD Select Social Index KLD--are also valuable additions to the SRI market.

    Helping Hand
    More than viewing SRI as a business model or the best way to invest, Bennett, like her clients, sees it as a reflection of her own values. Bennett does want to help, if not change, the world. She starts by donating 100% of her firm's profits to nonprofit groups, and she serves her community through her involvement in nonprofit organizations. Most recently, she joined the board of the YWCA Kauai--the only provider of domestic-violence and sexual-assault treatment on the Hawaiian island of Kauai. She's also funding the development of the group's Web site.

    Carrying this philosophy over to approximately 25 high-net-worth clients with investment portfolios averaging $1 million, Bennett has created a high-touch boutique firm, proving that there are enough clients who want SRI upon whom to build a practice.

    "My clients are very-aware people whom I meet with four times a year--often to talk about things other than investment performance," she says. "We take a global investment approach, so we discuss everything from the economy to politics to climate change--all of which guide me in formulating each client's SRI strategy."