Lipper Research Analyst Jeff Tjornehoj on "Business for Breakfast" 1060 KRCN - Charitable Donations and Fund Investing

A. That's right. A few fund companies--some old, some new--have recentlyunveiled some new products geared to "feel good" investing. What they do iscontribute a portion of the fund's expenses to charitable causes. That way,part of what is spent to manage your money is used to support organizationstrying to make the world a better place.

Q. Are these similar to socially responsible funds--are they weeding outcompanies or "sin stocks"?

A. Not really, although I think they're aiming for the same crowd. Anexample is American Century's LiveStrong series of funds. You may havenoticed that Tour de France champion Lance Armstrong is the new face ofAmerican Century's ad campaign. Part of that deal involves American Centurydonating proceeds from its LiveStrong funds' expenses to support the LanceArmstrong Foundation--the group synonymous with yellow rubber wristbands.Those funds' only restriction is to avoid tobacco stocks.

Q. But American Century isn't donating all of the funds' expenses, right?

A. That true--from what I can tell, American Century will donate a minimumof $1 million to Lance's foundation next year. But most of these fundsdonate some portion from profits--not generally a minimum.

Q. I like the tax deductibility of charitable donations--how does that workwith these funds?

A. It doesn't, and that's a real problem I have with them. You could pileyour money into these funds and make a good donation, but you'll get noneof the tax benefit. It reminds me of the for-profit company around townthat leaves clothing donation boxes at malls; as a donor you're doing agood thing. But why not donate to a not-for-profit and get an additionalbenefit for yourself?

Q. And I don't imagine these fund donations are sizable either?

A. Not so much. If they contribute 20 basis points of the management fee tocharity, that translates to about $2 per $1,000 invested. So, if you wrotea check for $200 to the Lance Armstrong Foundation you'd get the full taxdeduction you're entitled to, and you had as much impact as someone whoinvested $100,000.

Q. So, not a compelling picture of the LiveStrong funds?

A. No, nor for their counterparts from other firms. Lack of taxdeductibility and minimal effect has soured me on them. It's more efficientto invest in the best funds you can find and treat your donations as aseparate consideration.