Over the last decade I’ve been dismayed to see a huge proliferation of so-called “socially responsible” investment funds. These funds come in two forms: Holdings that support some sort of ideology by investing in companies that match those beliefs, and funds that refuse to invest in companies that they perceive to be causing some societal harm. The support funds focus on such things as green companies, companies that purport to be guided by some sort of religious belief, and companies that push some social agenda. The anti-funds may refuse to own tobacco, gambling, and alcohol companies, defense contractors or, in Mayor Michael Bloomberg’s case, companies that make really big soda cups.
Of course that’s not the purpose of the corporate structure in a capitalist society. Corporations owe a duty to shareholders to maximize profits. Period. Most of these “socially responsible” funds are just a vehicle to promote liberal beliefs. What about us conservatives?
I run an investment management firm and a few years ago I started noticing something. I had previously worked for a large free market-oriented think tank and when doing research on some stocks that had outperformed over long term periods, I noticed that those companies also had donated money to some of the right-leaning public policy organizations. These companies were entrepreneurial leaders and were donors in order to help promote free market capitalism in the United States. It turns out that when management believes in creative destruction, it translates into business success over the long term. One of the best ways to determine which companies really believe in the free markets is to look at which ones donate to free market organizations.
I thought this was an interesting, and potentially profitable, idea. I decided to do some research. I performed a backtest going back ten years. A portfolio made of these stocks significantly outperformed the S&P 500 during that time period.
From that research, I decided to launch The Hayek Fund. The Hayek Fund invests in corporations who financially support free market institutions and principles. It’s socially responsible investing for those of us who believe in the free markets. I call it an index fund for conservatives, and I believe it’s the first of its kind.
It’s a nice idea, but what really matters is performance over the long term. That’s what the liberal “socially responsible” funds miss. Since The Hayek Fund’s launch on September 7, 2010, it has returned 37.7% after fees, beating the S&P 500 by 10%. These returns are consistent with the backtests I ran going back to 2000. But, the returns since September 7, 2010 meant real money in the pockets of my investors, which include my family and me.
The Hayek Fund helps support those corporations who share our beliefs. No future return is guaranteed, but I am confident that companies that demonstrate their support for the free market system will continue to be more successful than their competitors.
To learn more about The Hayek Fund, please visit our website