Vice is Nice: Drink, Smoke and Gamble, and This Fund Soars

Over 150 funds call themselves socially responsible, investing only in companies that meet a series of ethical standards set by their fund managers. Then there's the Vice Fund. Gambling and casino stocks have risen steeply this year, in another sign that candy is dandy, but among other things, liquor is quicker.

Its prospectus says it favors "products or services often considered socially irresponsible." The fund has fulfilled that promise under several different fund managers, investing mainly in companies involved with alcohol, tobacco, gambling and military contracting. This politically incorrect approach has helped the Vice Fund outperform the Standard & Poor's 500-stock index from its inception in 2002. But the fund has had more than its share of management turmoil. A special monitor appointed by a federal court remains in place for Mutuals.com and all its affiliates, including the Vice Fund, to ensure compliance with securities laws.

The Vice Fund, now managed by Charles L. Norton, 32, and Michael J. Henry, 26, has stuck to its knitting. Both funds depend on the insight that stocks that exploit the dark side of human nature are a natural for Wall Street, particularly during economic downturns.

The Vice Fund returned 9.2 percent this year through Thursday, compared with 3.1 percent for the S.& P. 500. Over the last three years, the fund's return has been 20.6 percent, annualized, outpacing the 10.9 percent of the S.& P. 500. The fund has no load, or sales charge, and has an expense ratio of 1.75 percent. Its allocations as of May 31 included roughly 27 percent to casinos, gambling and lotteries; 24 percent to aerospace and defense; 24 percent to alcohol; and 21 percent to tobacco. From inception in March, the Gaming and Casino fund gained 0.8 percent through Thursday.

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http://www.nytimes.com/2006/07/09/business/yourmoney/09vice.html?ex=1152590400&en=bbf348cef53b84cb&ei=5087%0A