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Hate guns? Investments matter

By Sheyna Steiner ·
Wednesday, December 19, 2012
Posted: 5 pm ET

Investors alarmed by gun violence can have an impact.

Freedom Group, the manufacturer of the rifle used in last Friday's horrific shooting at a Newtown, Conn., elementary school, is being sold, The New York Times reported on Tuesday. Cerberus Capital Management, a private equity firm, will be selling the gun-maker as a result of the events last week.

Not coincidentally, one of Cerberus' biggest investors has a connection to schools. The California State Teachers' Retirement System, or CalSTRS, has $750 million invested with the firm.

CalSTRS executives and other public officials applauded Cerberus’ action, the Times reported. According to the story: "Thomas P. DiNapoli, the New York state comptroller, said he supported Cerberus’ decision to sell the Freedom Group and ordered a review of the state pension fund’s investments in firearms manufacturers. The $150 billion New York State Common Retirement Fund has $50 million invested with Cerberus."

The sale of Freedom Group demonstrates how investors can use their clout. "CalSTRS, the second-largest pension plan in the U.S., was  beginning to ask questions and then yesterday we heard that the private equity firm (Cerberus) had made the decision to sell," says Steven J. Schueth, president and chief marketing officer of First Affirmative Financial Network, which describes itself as a socially responsible investment management firm.

Other financial institutions are defending their holdings in gun manufacturers. Reuters reported on Tuesday that index fund giant Vanguard Group Inc. explained that its shares in firearms makers  Smith & Wesson and Sturm Ruger & Co. are in index funds that must exactly mirror market indices. Vanguard said its funds cannot meet what it called the "social concerns" of all shareholders, the Reuters story reported.

'Sustainable and responsible' investing

The situation highlights how difficult it may be for small investors to put their money solely into companies that reflect their values. Investors in index funds have a hard time if they want to avoid companies that sell weapons, alcohol and tobacco or, on the other side, if they want to invest only in environmentally-aware businesses.

In many cases, people probably don't even know all the companies they own through mutual funds.

"Individual investors must ask questions and must know what they own. They should ask questions of their financial planners and advisers, money managers, broker-dealers, pension funds and others on what types of companies are included in their portfolio and in their retirement plans," says Alya Kayal, director of policy and programs at US SIF, a trade group for  investment professionals, firms, institutions and organizations focused on what its members describe as sustainable and responsible investing.

Individuals who invest primarily through workplace retirement plans are particularly limited.  Only 14 percent of defined contribution plans offer one or more sustainable and responsible investment, or SRI, option, according to a 2011 survey of plan sponsors by US SIF and the human resources consulting group Mercer.

"If you're an employee of a company with a retirement plan that doesn’t have responsible investment options, start asking for them. That is the only way it happens. The only way they will move off the dime is if they experience demand from inside the firm," says Schueth, of First Affirmative Financial Network.

If you're stuck owning a piece of a company you disagree with, you can try to change the company. Publicly-traded businesses hold votes every year on a host of issues. Votes are done via proxies, ballots that are mailed in if you can't attend the annual shareholders meeting.

"I'd also say to the small investor that if you own a company through a mutual fund, the fund company will vote shares on your behalf," says Schueth. Investors can typically find out on a fund company's website how their fund votes proxies. Most mutual funds tend to vote with management.

"There are a group of funds out there that not only look at environmental, social or governance issues in the investment process but also vote shares on behalf of clients in a responsible manner. If you own stock directly you can vote -- even if you own a little bit," Schueth says.

If shareholders don't vote their proxies, "you're giving up an opportunity to make a difference," he says.

Are there any companies you'd rather not hold in your current portfolio?

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Follow me on Twitter: @SheynaSteiner.

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December 31, 2012 at 8:00 pm

Epic, by your spelling you must one of those socialist north of the border. Keep out of our business

December 31, 2012 at 7:58 pm

like most stories on Yahoo, garbage.

George L. Lyon, Jr.
December 31, 2012 at 2:22 pm

What silliness. Blame the object instead of the crazy person who misuses it. I invest in booze, hamburgers, guns, cigarettes, cars, drugs, banks, etc. I don't loose a second of sleep over it.

December 31, 2012 at 12:06 pm

What a pathetic article, shame on cnbc for running this, the insane nut job is the one who killed all of those children, and he could of used any means to do it! you anti gun people are pathetic and weak minded! 30-50 thousand deaths a year from automobile accidents, and how many of those are alcohol related?
One nut job goes crazy using a gun and you want to take guns from
170 million people, good luck!
of course the crazy criminals will give theirs up!!!!
Get a brain, get a life, and keep your foolish opinions to yourself!!!!!!!

December 31, 2012 at 11:19 am

are you going to give up stocks in the energy, chemical, mining and forest sectors? they all kill living creatures and displace people.

December 31, 2012 at 10:20 am

i remember when people killed other people:
now guns kill people.
if that is the case i would get rid of guns too.

Fact Checker
December 25, 2012 at 2:27 pm

I read your article and I am hesitant to believe any of the facts and information you set forth in the article because you made an obvious mistake in your second sentence. In your second sentence you stated "the rifle used". I am not sure you listened or read any of the news accounts of this horrific shooting. If you did you would have known that a rifle was not used in the shooting. Two hand guns (a Glock and a Sig Sauer) were used in the shooting and not a rifle. The rifle was actually in the trunk of the car and not used in any of the shootings. Because of this obvious mistake of fact, I could only deduct that your article is full of mistakes on facts and wrong information. Your article has lost its integrity.

I am not writing to debate gun controls or gun issues. I am only writing because I am disappointed in the media when I read an article or view a news story that is full of mistakes and wrong information, no matter what the subject. When I see or read an obvious mistake in a news story, the entire story loses its integrity even if all the other fact are correct. In the future you should proof read your articles and double check your facts before publishing them.

Fact Checker

December 24, 2012 at 4:26 pm

In summation, while it's laudable that Cerberus sold off Freedom Group (I guess there's nothing that screams FREEEEDOMM!!! Like blowing someone's head off, but what do I know?), let's also keep it realistic and understand that in order for investment companies to reach landmarks and benchmarks set forth by their investors, there's going to be investments in companies morally upsetting to some. So if Smith & Wesson is (God Forbid) used in another massacre, not just school wise, that makes Smith & Wesson automatically closed as well? Come on people, if we can still make bats and other non-guns weapons and then they're used to kill people, we don't ban all of them, so apply that to guns as well. It's not the gun makers' fault if someone unstable gets a gun. It would be the sellers of them.

Epic music
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