The Roosevelt Investment Group is trying to make the war on terror a profitable one for investors with the Bull Moose mutual fund, the first fund that actively screens potential investments for connections to terror-sponsoring states such as Iran, Cuba, and Sudan. The New York-based investment manager, with $800 million under management, is betting that Americans will pay to guarantee their investment dollars don’t support these regimes in the same way that many investors avoided investing in companies that did business in apartheid-era South Africa.

“Americans hate terrorism and want it stopped,” said the fund’s president, Adam Scheer, “And the fund is a way of avoiding what we see is the real economic risk of having exposure to companies doing business with these nations.”

The fund’s certification three weeks ago as “terror-free” comes at the same time as several high-profile successes of New York City comptroller, William C. Thompson Jr. His shareholder resolutions on behalf of the $74 billion city pension funds forced Halliburton Corporation to stop soliciting new Iranian oilfield contracts, and Aon Corporation to form a senior management panel to study its foreign subsidiaries’ Iranian operations. Other companies that ceased doing business in Iran due to Mr. Thompson’s pressure include oilfield services provider Cooper-Cameron, General Electric, and ConocoPhillips.

It is illegal for companies based in America to do business in or to set up subsidiaries that do business in terror-sponsoring states. However, a loophole in the law allows companies with already established, independently run foreign subsidiaries to do business in these countries. Senator Lautenberg, a Democrat of New Jersey, proposed legislation late last year that would make it illegal for American corporations to have any financial connection to terror-sponsoring states.

Mr. Scheer said Roosevelt’s decision to get into the “social-screening” aspect of investing stemmed from a conversation with a client about six months ago. “He asked us why we are managing money by owning companies that have exposure to terrorism,” he said, adding that the client suggested that if the fund had a credible alternative, they could draw significant investor attention. Mr. Scheer said his firm – which was founded to manage the investments of the Roosevelt family’s investments – was certified “terror-free” by research boutique Conflict Securities Advisory Group about three weeks ago. Several stocks were “flagged” in the screening process and subsequently sold, though he declined to name the stocks.

The fund, with about $3.6 million in assets, is rated five stars by fund evaluator Morningstar.

“We’re getting good feedback and we are starting to get some brokers to put us on their ‘menu,’ but it will take awhile,” said Mr. Scheer. So-called socially responsible investing, or investing that uses criteria such as employment or environmental practices to determine the suitability of an investment, accounts for almost $2 trillion, according to the Social Investment Forum.

The notion of screening companies for their exposure to terror-sponsoring countries is really about risk management, said CSAG’s chief operating officer, Adam Pener.

“Companies might have a lot to lose reputation-wise if they were found to be central to economically propping up a regime that has a proven ability to kill Americans,” he said. Moreover, the risk of doing business in these states is often out of all proportion to the benefits gained, said Mr. Pener. He cited GE’s $270 million in revenue, out of $152 billion in total revenue, from its Iranian contracts as an example – “GE stopped because their downside in publicity and eventually, to market capitalization, was many times greater than the money brought in.”