The Vice Fund, managed by USA Mutuals, is a mutual fund that uniquely focuses its investments on industries often labeled as "sin stocks." These industries typically include those that are seen as socially irresponsible, such as alcohol, tobacco, gaming, and defense. This distinctive investment philosophy has sparked interest among those looking to diversify their portfolios and possibly capitalize on sectors that are resilient during various market conditions.

Historical Context

Before the establishment of the Vice Fund, the term “vice fund” was used informally to describe any fund that heavily invested in sin stocks. The Vice Fund was originally launched in 2002 under the name Vitium Fund, which highlights its focus on vices. However, this name underwent changes—rebranded as the Vice Global Fund on May 23, 2019, it ultimately reverted to the original "Vice Fund" on August 4, 2021, showcasing the evolving nature of investment branding in the financial sector.

Key Investment Areas

The Vice Fund primarily focuses on companies that derive a significant portion of their revenue from the following industries:

By focusing on these sectors, the Vice Fund seeks out high-quality, dividend-paying stocks that it believes have substantial barriers to entry, which in turn, enhances the potential for stable and reliable returns.

Market Resilience and Diversification

One of the distinguishing features of the Vice Fund is its assertion that investments in vice industries can be market-neutral. This means that such investments tend to perform well regardless of market conditions—benefiting from a steady demand for vice-related products. Historically, the demand for goods in these sectors remains relatively stable even during economic downturns.

The Vice Fund is also diversified internationally, offering exposure to both domestic and foreign equities. This international diversification helps mitigate broad market volatility. The emphasis on high-quality, dividend-paying companies with positive cash flows is designed to produce income payouts, providing a layer of financial security to investors.

Fund Structure and Performance

The Vice Fund operates as an open-end mutual fund with multiple share classes, including A, C, and investor shares alongside institutional shares. The management fee for the fund stands at 0.95%, with operating expenses ranging between 1.24% and 2.24% depending on the share class.

Trading Options and Fees

The Vice Fund can be accessed through various full-service and discount brokerages. While the institutional classes have no sales loads, A shares come with a front-end load of 5.75% and a back-end load of 1% through full-service intermediaries. C shares carry a contingent deferred 1% back-end load within the first 12 months post-purchase.

Performance Metrics

Investors in the Vice Fund have experienced fairly steady annual returns, driven significantly by dividends. As of June 30, 2022, the Investor Class reported a five-year annualized return of 0.74% and a 10-year annualized return of 6.79%. Since its inception, the fund has yielded an annualized return of 7.82%, though it trails its benchmark, the MSCI All Country World Index, which sits at 8.32%.

Despite a backward trend in dividends, as of September 9, 2022, the fund's total assets under management were reported at $79.2 million, with major holdings including prominent companies such as Galaxy Entertainment, Northrop Grumman, Raytheon Technologies, and Philip Morris International.

Conclusion

The Vice Fund represents a unique opportunity for investors willing to engage with sectors that carry a social stigma but also have the potential for steady returns. Understanding the dynamics of vice industries, their resilience in varying economic climates, and the fund's structure can provide valuable insights for those considering this unconventional investment avenue. As with any investment, potential investors should conduct thorough research and consider their financial goals and risk appetite before proceeding.