Vice Fund - A fund for those who love drinking, smoking and gambling
Just when you think there are more than enough funds around, along comes one that plays off of our vices.
Within the universe of mutual funds, today's investors have all sorts of choices to make. The most obvious? Between asset classes like stocks or bonds; investment styles such as growth or value; capitalizations, as in small-med- or large-cap companies; and any variety of A to Z Class share ways, to pay commissions to those selling them.
Once, or perhaps ever before, those decisions are made, investors also have to choose what kind of fund they'd like to invest in. Then it's time to choose among the thousands upon thousands of funds available for just the right one or ones. Some choose to invest in dividend paying companies, others don't. Some select index funds and others only the largest funds with plenty of assets. And the list of fund type choices goes on.
There are even funds for socially sensitive---those who prefer to invest with their conscious. Here you'll find funds from religious organizations and socially responsible funds for those who don't want to have their money invested into any of the "sin stocks", i.e., companies that make things like cigarettes, weapons, or alcohol, or represent the gaming industry, . And now there's a fund for just the opposite: For those who love the sin stocks there is the Vice Fund.
Yes, it's true, on September 1, 2002, the Vice Fund(VICEX) came to market. The fund's per share price on that date $10; at the close on Friday, Sept, 27, they were down 44 cents to $9.56.
Dan Ahrens is one of the fund's two portfolio managers. He said one of the reasons the fund was created was because of the stocks socially responsible funds omitted from their buy lists. "There are well over 100 socially conscious funds and one of the primary things they screen against are alcohol, tobacco, gambling and defense stocks," says Ahrens, who's been with Mutuals.com since its inception in 1994. "And we think that basket of stocks is a very good one."
With 41 stocks in its portfolio, the fund currently has nearly 25 percent of its assets invested in alcohol stocks; 24 percent in defense companies; 19 percent in gambling stocks and 18 percent in tobacco.
While the fund is still small, about $5 million in assets, party animals are likely to be familiar with many of its top holdings which includes companies like Anheuser-Busch, British American Tobacco and Harrah's Entertainment.
And in a time when the prospects of war seem all too real, defense stocks within the fund's portfolio includes companies like Lockheed Martin, L 3 Communications and General Dynamics.
Although the idea of a vice fund is certainly novel, it's not the only vice fund around. Scott Cooley, senior analyst at Morningstar, pointed out the Morgan Fun Fund, (MFUN). It's a closed-end fund that, like all funds with a history, has had its ups and downs "Right now, (9/27/02)," says Cooley, " It's down 25.26 percent."
Cooley says that gimmick funds tend to get rolled out right after the asset class they are investing in has done well. And that for the most part, the fund's don't have much staying power. "There is not a logical investment thesis there," he says. "And you would never see a Vanguard or American Funds roll out a fund like this."
Bottom line, look before you leap. As appealing as the drinking, smoking, gambling and defense stocks can be, their portfolio at best will be a cyclical one. And at worst, might create a vice or two for you.
Dian Vujovich is a nationally syndicated mutual fund columnist, author of a number of books including Straight Talk About Mutual Funds (McGraw-Hill), and publisher of this web site.
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