Vanguard answers Darfur critics
The mutual fund group says it urged 4 firms operating in Sudan to work for change. But it did not sell its shares.
The Vanguard Group said it urged four companies that operate in Sudan, where government-sponsored militias have killed hundreds of thousands and displaced millions from the Darfur region, to do what they could to improve conditions there.
But the nation's third-largest mutual fund company stopped short of selling its shares in energy companies such as China's PetroChina Co. Ltd. and India's Oil & Natural Gas Corp. Ltd., as activists have been exhorting it to do.
Instead, Vanguard sent letters to four companies "encouraging them to take part in constructive and positive change in Sudan in a way that improves the health and welfare of the Sudanese people," according to a statement.
A coalition of activists has pursued changes at Vanguard and other large mutual fund companies, including No. 1 Fidelity and Franklin Resources Inc., because it believes that action by high-profile investors can influence the government-controlled companies active in Sudan. American Funds is the second-largest mutual fund firm.
"It can have a meaningful impact," said Allyn Brooks-Lasure, spokesman for the Save Darfur Coalition of Washington, an alliance of more than 100 faith-based, humanitarian and human-rights organizations.
Activists say oil revenue in Sudan is funding the slaughter and dispossession of tribes in the western region of Darfur. More than two years ago, President Bush called the killing in Darfur genocide.
The Sudan Divestment Task Force says Sudan divestment policies have been adopted by 20 states, including New Jersey; 59 universities, including the University of Pennsylvania; and 10 cities, including Philadelphia.
Activists took credit for the sale of shares of PetroChina worth $600 million and shares of Sinopec worth $100 million by four Fidelity funds.
Vin Loporchio, a spokesman for Fidelity, said: "Fidelity does not tell its fund managers when to buy or sell a given stock."
In Vanguard's case, two index funds are responsible for most of its holdings of four companies - PetroChina, Sinopec, Oil & Natural Gas and Petronas - deemed the "worst" in Sudan by Investors Against Genocide.
Vanguard's largest holding that activists object to is PetroChina. At the end of July, Vanguard's Emerging Markets Stock Index Fund - which tracks the MSCI Emerging Markets index - held $179 million of shares in PetroChina. That amounted to 0.9 percent of the fund's $19.2 billion in assets at the time.
"As Vanguard is an indexer, the pressure probably should be brought to bear on the index providers," said Daniel P. Wiener, of the Independent Adviser for Vanguard Investors.
In a sign that activist pressure is not dampening investor appetite for PetroChina's shares, the company yesterday raised $8.94 billion in a Shanghai public offering. The value of shares in PetroChina, whose largest shareowner is state-owned China National Petroleum Corp., have doubled in value since mid-August.
As of April 30, the actively managed Vanguard Energy Fund had $18.7 million of its $11 billion in assets invested in companies targeted by activists.
"The adviser is charged with producing the highest investment returns possible," Vanguard said in its statement. "We do not require, or even expect, our advisers to make investment decisions based on social or political issues."