Citigroup Inc. is teaming up with the Humane Society of the United States to launch a mutual fund that invests exclusively in animal-friendly companies.
The Humane Equity Fund, which Citigroup and the Humane Society plan to begin marketing in January, is the first investment product that the 45-year-old animal rights group has sponsored.
The effort also marks the first time Citigroup will approach a fund supermarket - such as those operated by Charles Schwab & Co. and Fidelity Investments - about distributing its mutual funds, said Daniel R. Darst, senior vice president and head of U.S. retail marketing for SSB Citi Asset Management Group.
The fund, which will carry no load, will also be sold through a toll-free number that will be advertised nationally in print and broadcast media.
The Humane Equity Fund will not invest in companies that do research or experiment on animals, which rules out certain pharmaceutical and medical operations, as well as some cosmetics companies. The fund also will avoid companies that process or sell meat, which eliminates certain consumer operations and meat packagers.
SSB Citi will require a $1,000 investment and charge annual operating expenses of 145 basis points per dollar. The fee, while high for a mutual fund, is expected to come down as the portfolio gathers assets.
Citigroup sees the fund as "a logical progression" in the socially aware investing that the company already does, Mr. Darst said.
The fund is also a way for Citi SSB to set itself apart from the herd of mutual fund providers, he said.
"Everybody is creating mutual funds," said Walter Fitzgerald, a financial services analyst with Brean Murray & Co. in New York. "This will allow Citigroup to somewhat stand away from the pack.
"Ultimately, the product's performance will determine its success," he added.
The Humane Society approached Citigroup about the product, said Thomas Waite, chief financial officer of the Washington organization. His group has consulted Citigroup on its own investment portfolio, he said.
"We felt it important for a major investment house to underwrite a fund with an animal ethic in it," Mr. Waite said.
The fund will serve a necessary role for the Humane Society, he said. "We felt for a long time there wasn't an investment vehicle where members of our constituency could invest comfortably."
Mr. Waite said he hopes to have at least $100 million in the fund within a couple of years.
Separately, this month Citigroup teamed up with the state of Colorado to launch a fund that helps students to save for college. Citigroup plans to distribute the fund through its brokers and through other banks, including the Colorado arm of Bank One Corp. of Chicago and First Bank of Denver, Mr. Darst said.
