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November 24, 1999
Dreyfus Premier Third Century Approaches the Third Millennium
An anomaly in a family of conventional funds, the Third Century Fund is still a pioneer in social
responsibility after 27 years.
SocialFunds.com --
Dreyfus Third Century Fund was one of the originals. Created in 1972 by Dreyfus former Chairman and
CEO Howard Stein, and named for the coming national bicentennial, the fund was one of the first to
combine socially responsible objectives with financial criteria. Third Century could easily be
overlooked amidst the gaggle of more than 160 other Dreyfus funds, but it is still actively
steering socially responsible investing toward the future.
 Dreyfus Corporation is one of the nation's leading
mutual fund companies, a subsidiary of Mellon Bank, managing more than $120 billion ($US) in mutual
fund portfolios. Nested among this large extended family of funds, like the irreverent socially
responsible cousin, is the Third Century Fund, managing about $1.2 billion in assets.
"Howard Stein was quite politically active, and quite influential in New York, and he wanted to
create a mutual fund that could make a difference in the quality of life of Americans," said
Portfolio Manager Paul Hilton. "This predates most of the work in social investing. It didn't grow
out of the peace movement as Pax World did. It was really Stein's effort to deal with the more
standard social issues of that time."
In the early days of the Third Century Fund, a third
of the portfolio was dedicated to small companies with particularly good social records in areas
like education, health, or the environment. The rest of the portfolio was manned by a cadre of full
time analysts, collecting information on companies to identify the "best of class," a strategy
which seeks the most responsible companies within each industry.
"They were really
pioneers," said Hilton. "There's a lot of talk about best of class investing these days, but Third
Century was doing it from the very beginning."
Dreyfus' social fund recently got a
somewhat more mainstream profile and a new name, Dreyfus Premier Third Century Fund. As of August
31, the fund was added to Dreyfus' "Premier" family of funds widely available through financial
advisors, broker-dealers, and other third-party financial intermediaries. "Investors have become
interested in choosing socially conscious investments with increasing frequency," said Stephen E.
Canter, president of The Dreyfus Corporation.
But with the growing popularity of socially
oriented funds has come changes in Third Century. "There was a movement among some of the other
social investment funds toward avoidance screening, focusing on "sin" stocks, weapons, nuclear
power, and so on," said Hilton. "Third Century was bit different; it was more of a social change
fund than strictly an avoidance screened fund."
In 1990 concern at Dreyfus about the
liability of the third of the portfolio dedicated to smaller names led to these securities being
dropped. Third Century instead began to put the entire portfolio through the same selection
process. "It was about that time that we changed more to an avoidance-screened type of fund," said
Hilton, following the trend other socially responsible funds, although it also looked for industry
leaders as well.
The Premier Third Century Fund still provides investors with a positive
venue for supporting companies committed environmental protection, occupational health and safety,
consumer protection, and equal employment. Selection of securities for the fund based on financial
concerns is managed by NCM Capital Management Group, of North Carolina, but social screens are
performed by Hilton, who has been with Dreyfus since 1998.
"We're working toward a more
hybrid approach," said Hilton. "We've begun by becoming more involved in community investing."
Premier Third Century has devoted $100,000 to a CD with Self-Help, a community development credit
union, and plans to invest a total of $500,000 in community development in the future. They are
also stepping up their involvement in shareholder advocacy, making them one of the few funds out
there active on all three fronts of social investing.
The Premier Third Century Fund has
supported shareholder resolutions regarding such social issues as Burmese divestment, environmental
practices and disclosures, fair wage issues, executive compensation, and the implementation of the
Coalition for Environmentally Responsible Economies (CERES) Principles. But Hilton sees their niche
in a more interactive form of shareholder advocacy, and this is where Premier Third Century's
pioneering spirit still shines on.
"In a way, being part of a large firm limits us, but
there are advantages too," said Hilton. "We have chosen not to sponsor shareholder resolutions, but
to establish dialogue with companies to improve their records." Working with a group of other big
New York social investment firms, Premier Third Century uses the leverage of over $10 billion to
bring companies to the table for discussion of key social and environmental issues that they can
improve on.
Hilton sees this sort of hands-on advocacy as an important component to the
future success of social investing. The successful history of social investing has earned it
credibility, but its real potential impact for social change cannot be wielded through avoidance
screens. "I would rather include companies like Coca-Cola, and discuss with them the use of
recycled materials in their bottles, than include a hundred Ben & Jerry's," said Hilton.
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