Next year Swiss investment boutique Naissance Capital plans to launch the Women's Leadership Fund, a mutual fund that owns shares in companies led by women. Is this a legitimate investing technique or just a gimmick? Unfortunately, in the world of mutual funds where more than 8,000 funds try to set themselves apart from the herd, gimmicks abound. Not everyone can beat the market.  The fund is open-ended and seeks to outperform the MSCI World Total Net Return index. The minimum investment is $100,000 and there's an annual management fee of 1.5%. Twenty percent of the fees from the fund will go toward helping underprivileged women--certainly a worthy cause but immaterial to the question of whether or not the fund is a good investment.  This isn't the only kind of specialty or socially responsible fund; there are other mutual funds that focus on the environment, company management and even cater to certain religious beliefs. Calvert Investments offers socially responsible ways of investing which it calls sustainable and responsible investing. According to Calvert's Web site, "SRI was first formally practiced by religious investors who, nearly 100 years ago, avoided companies involved in tobacco, alcohol and gambling." Calvert's sustainable and responsible investing evolved into focusing on shareholder advocacy and company ownership and finding companies that can meet societal needs profitably and are not publicly traded.  Follow Intelligent Investing on Twitter.  Sign Up For The Daily Intelligent Investing Newsletter.  The Calvert World Values International fund is up 17.86% year-to-date and 11.33% for the past five years. Its top holdings include Sanofi-Aventis ( SNY - news - people ), Santos Limited ( STOSY - news - people ) and Sony Corporation ( SNE - news - people ). The Calvert example is an interesting one, because it speaks to the confusion around socially responsible investing. Plenty of people who would describe themselves as socially conscious would view gambling, drinking and smoking as victimless crimes at worst.  Ave Maria Mutual Funds offer morally responsible investing by investing in companies that don't violate beliefs of the Catholic Church. The firm says there's an equal emphasis placed on investment performance and moral criteria. "Using a proprietary moral screening process, companies eliminated from investment consideration would, in general, encompass two major categories: first, those involved in the practice of abortion, and second, companies whose policies are judged to be anti-family, such as companies that produce or distribute pornography or whose policies undermine the sacrament of marriage," the firm's Web site says.  Ave Maria offers several types of funds; the Ave Maria Catholic Values fund has Meadobook Insurance Group, Inc., Haliburton Company and BE Aerospace ( BEAV - news - people ) as its top three holdings. This fund is up 29.87% year-to-date and down 9.17% for the last five years. The Ave Maria Growth Fund, has Occidental Petroleum Corporation ( OXY - news - people ), Varian Medical Systems, Inc. ( VAR - news - people ) and Kellogg Company ( K - news - people ) as its top three holdings. The growth fund is up 19.6% year-to-date and 11.37% for the past five years.  The Appleseed mutual fund invests in companies that general profits but are also aware of their impact on the environment and society while trying to make a profit. Its top holdings are Federated Treasury Obligations, John B. Sanfilippo & Son ( JBSS - news - people ) and Pfizer Inc. ( PFE - news - people ). The fund is up 53.14% year-to-date and 16.12% over the last five years.  Marc Lowlicht, head of wealth management at Further Lane Asset Management, advises investors not to just invest in specialty or socially responsible funds because you think you're making a difference. Look at these funds track records before investing in them, he says, as very few funds of this type outperform. To determine whether the fund is a worthwhile investment, look at the fund's performance compared to its target index, Lowlicht says.  If you decide to invest in these kinds of funds, Lowlicht advises against making them too big of a portion of your portfolio. "I would treat any fund that is that specific as a compliment to an entire portfolio," he says, adding, "If they become a core holding then the portfolio will be too limited."  Sometimes these funds are only socially responsible by name instead of by practice, Lowlicht says. For instance, he notes, some socially responsible funds owned Exxon Mobile Corporation; an investor who was an environmentalist probably would not agree with this and wouldn't know that position was part of the portfolio had they not done their research. "The same is true for some of the bank stocks. I think we can all agree that we would not have considered these to be socially responsible companies."  Sacha Millstone, senior vice president at Raymond James Financial ( RJF - news - people ), disagrees. "I have been active in this field since 1986 and I am very familiar with the screening processes of the SRI funds which are extensive, very in-depth and professional," she says.  Millstone strongly supports the idea of following companies that are run by women and wishes more companies were run by women. "I will flat out state that if women were represented in management in equal numbers to men all across our financial system, including mid and top management of firms, funds and all levels of advisory including hedge funds and private equity, I do not believe that we would have had the crisis we just had caused by feverish risk taking out of all proportion to potential return and extremely high levels of leverage," she says.  Millstone recommends the following funds run by women: Pax World Women's Equity Fund (run by Sujatha Avutu), Pax World High Yield Return (Mary Austin), Touchstone Mid Cap (Susan Suvall) and AllianceBernstein ( AB - news - people ) Global Thematic Fund (Catherine Wood).  Millstone believes (controversially) that men and women approach investments and trading differently. Whether or not she's right about that, there's definitely a dearth of women mutual fund managers and corporate executives compared with the population and work force.  Women make up about half of the entire U.S. labor force, according to the National Council for Research on Women's June report entitled "Women in Fund Management." "According to recent research, women represented a scant 10% of all traditional mutual fund managers, a figure that barely budged over the past decade despite increasing numbers of women with degrees in finance and women certified as financial advisers," the report says. There are even less women managing alternative investments, with women managing 3% of the $1.9 trillion invested in hedge funds in 2008, the report says.  Sometimes when women are promoted to top spots, it's only so the company can meet a quota or be politically correct, says Hilary Kramer, chief investment officer of A&G Capital Research. She says companies that make token promotions "do a disservice to shareholders, employees and the image of women as qualified and capable leaders."  When determining which funds are worthwhile, Kramer says good funds have to have a strong track record, seed capital of at least $250 million and a solid management team.  "But most of all, the fund must be able to promote itself and market itself in a way that makes people want to put their money in that fund," Kramer says, adding, "being appealing and impressive isn't enough; funds must convert their prospects into check writers."  The only problem Kramer sees with the new Naissance Capital fund is its possible lack of diversification. "This is fine, but it limits the investment horizon in terms of breadth," she says. Kramer hasn't seen enough women running engineering/infrastructure, financial services and utilities companies, so she doesn't anticipate the fund investing in these sectors as a result.  Get Intelligent Investing On Your iPhone.  See More Intelligent Investing Features.
A new mutual fund buys stock in companies managed by women and donates profits to good causes. But is this any way to make investments?