How to Find a Socially Responsible Hedge Fund

The Baby Boomer generation redefines stages of their lives as they go along. So it’s no surprise they are also writing their own rules for what they do with their money. Not satisfied with just investing, many Boomers are perfecting the art of what some experts call "shareholder activism." The goal is to find and invest in socially responsible hedge funds that include companies operating ethically and providing benefit or service to society.

Instructions

Difficulty: Moderately Challenging

1. Decide if you want to mix your money and your heart. If you prefer to keep them separate, socially responsible investing (SRI) isn’t for you.
2. Determine if you qualify to be in the hedge fund market. Anyone can have an investment portfolio. However, hedge funds in the United States are open only to an accredited investor, defined as someone making more than $200,000 a year or having a net worth of more than $1 million.
3. Define your values and search for companies that share those values. You can initiate "negative screening" of companies, for example, that promote weapons, gambling or tobacco. You can also "positive screen" for the best rated companies that share your concerns, such as children or hunger.
4. Screen various kinds of companies and indexes quickly by using the internet. Stick with companies with well-known reputations. Many financial websites have a list of SRI hedge funds. Indexes are helpful, i.e., the Wilderhill Clean Energy Index includes only environmentally conscious companies.
5. Enroll in socially responsible hedge funds if you wish, but understand they won't usually make much more money than your regular investments. There is a bit more flexibility because hedge funds are exempt from direct regulation by the SEC or NASD. And since SRI involves more forward thinking companies, they often carry a lower risk.

Tips & Warnings

• Socially responsible hedge funds often donate portions of profits to charity. Make sure you know which charities are involved and decide if you agree with their mission statements.
• If you decide to hand over the research to professionals, keep in mind socially responsible investing is one of the fastest-growing sectors in the financial services industry which makes it a prime target for scammers posing as SRI experts and fund managers.