By Ellie Winninghoff
It should be no surprise that Robert Brooke Zevin, the grandfather of socially responsible investing, does not play by Wall Street's rules.
After all, in l967 he co-authored The Call to Resist Illegitimate Authority, a declaration of civil disobedience against the Vietnam War. Zevin has gone to jail for participating in a protest against Dow Chemical. And the Harvard PhD in economics played a key role in the South Africa divestment campaign by writing major studies to justify it and by serving as the expert witness for the city of Baltimore in its successful legal defense of divestment in l987. Meanwhile, he found time to start the first SRI unit at a U.S. bank.
What may be a surprise, however, is that Zevin Asset Management's (ZAM) low-risk strategy of avoiding loss--something that conventional wisdom suggests should result in low returns--has actually resulted in beating the firm's equity benchmark, the Dow Jones Global Index. Since the firm's inception 14 years ago, its Global Appreciation composite has beaten the benchmark by more than 90%.
According to ZAM, its success is based on a strategy that participates in 80% of the increases in positive markets and avoids more than half of the losses in bad markets.
Since ZAM's inception, the Dow Jones Global Index jumped at an annual rate of 34.4% per year during the 34 quarters when the markets rose versus 27.2% for the firm's non-taxable accounts. But during the 21 quarters when the markets declined, the Zevin composite's average annual drop of 14.9% was less than half as much as the benchmark, which plummeted at an average rate of 31.3%.
As a result, $100,000 invested with ZAM at the firm's inception would now be worth $330,000 versus $170,000 for the benchmark.
"The important thing always is not to lose money [when the market is] on the way down," he says.
SRI Neither Helps Nor Hinders
Zevin dabbled in investments as an economics professor at Cal-Berkeley, and later at Columbia University. He originally started investing professionally because he thought it would provide him with more time than teaching and research could to pursue political interests and be an activist. And he only started doing socially responsible investing when his clients, who he often met through his political causes, insisted upon it.
"I will do whatever you want, especially since you are trying to align what you're doing with the causes I'm trying to raise money for," he recalls telling them. "But it's probably going to cost you money to do that."
Five years later, he realized they were not losing money by doing that; in fact, performance was actually better. Even so, he doesn't believe SRI helps or hinders performance.