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A vice little earner

"When we launched our Vice Fund, one SRI [socially responsible investing] group said they would pray for us," says Dan Ahrens, co-manager of's Vice Fund.

The Vice Fund, founded a year ago, invests exclusively in gaming and casinos, defence and aerospace, alcohol, and tobacco stocks, precisely those shunned by SRIs and other ethical funds.

The fund is up 12.7%, outperforming the Dow Jones by a modest 1.1%. Although it has underperformed the S&P500, up 12.94%, Ahrens does not believe this undermines his strategy. "The S&P500 lost billions in 2001 and 2002 and is only now regaining," he says. "The stocks we invest in were up in 2000, 2001, and 2002."

Ahrens insists the sectors his fund invests in offer strong performance. "There had been a lot of talk about ethical funds and we joked about what would happen if we did the opposite," he says. "We back-tested the data and saw it was feasible."

The data are indeed impressive. Ahrens says over the past three years, tobacco showed a cumulative return of 107.57%, gaming and casinos were up 68.36%, alcohol 32.05%, and aerospace and defence 22.71%. Over the same time the S&P500 fell 33.01%.

Vice, it seems, can be sinfully rewarding.

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