Just days before the November elections, advertisements began popping up on the liberal political website Daily Kos promoting the Blue Fund, described as the “The First No-Load, No Republican Mutual Fund.”

The Fund, actually a pair of funds, takes social investing to a new level, adding what it calls “political factors” to the more commonly used social issues. “We build our portfolios on core Democratic values like environmental sustainability, community participation and respect for human rights,” the Fund says. “Then we go a step further, investing only in those companies whose political contributions demonstrate a sincere commitment to these values.” Joe Andrew, chairman of the Blue Fund board, is a former chairman of the Democratic National Committee.

The fund excludes companies selling firearms and tobacco products, and screens for companies that give more than 50 percent of their political donations to Democratic organizations or candidates.

For the large cap fund, the top 25 holdings (selected from among the S&P 500) make up 60 percent of the portfolio, with three issues at 5 percent each—Apple, Fannie Mae and Google. The small cap fund selects from components of the Russell 2000. At mid-October, financial services sector shares were the largest component, 28 percent of the portfolio.

The fund’s website asks what investors would like to see the fund or its investment advisor do next. Among the choices: organize a Blue Economic Forum of progressive political, business and academic communities; launch a Blue Green Fund focused on clean energy investments; launch a Blue Bond Fund offering additional diversification; or sponsor a speaker series so Blue investors can discuss progressive values at the intersection of business and politics.

Blue Fund isn’t the first mutual fund to stir in political factors. The Free Enterprise Action Fund, launched in March 2005, is “dedicated to providing both financial and pro-free enterprise ideological returns to investors.” The reason? “Left-wing social and political activists are harnessing the power, resources and influence of publicly-owned corporations to advance their social and political agendas.” Such groups, it adds, “use capitalism against capitalism under the guise of ‘corporate social responsibility’ and ‘socially responsible investing.’”
Ironically, the fund finds itself in agreement with activist shareholder groups in pressing companies to disclose more information about policies on environmental issues and about political contributions, although it might well draw opposite conclusions based on that information.