Complicity in Weapons Didn't Even Pay You

A Mauritian foreign equity fund holds exposure to weapons manufacturers. Screening out the top funds' exposure indicates that, over the past five years, the return would have been more.

Since 2023 I've been asking almost everybody around me, online and offline, who holds their pension.

They'd give me this name and that name, this policy and that policy.

Then I'd ask whether they knew how their pension manager actually invested the money.

The conversation branched, almost always, into three responses:

1.         I don't know.

2.         I don't care.

3.         I only look at the returns.

This post is for 1 and 3. Response 2 can hop off here.

Because Mauritius is a non-militarised island economy, local investors assume their money carries no military exposure. For local investments, that's broadly true. For foreign exposure, it isn't.

Most foreign equity products sold in Mauritius are funds-of-funds: your money enters a local vehicle, which buys international ETFs and mutual funds, which hold thousands of companies.

By the third layer, nobody is really looking.

The case study

We used the Swan Global Funds Ltd – Foreign Equity Fund as a worked example - not because it is unusual, but because it is typical.

Large (MUR 1.57bn), long-running, documented, structurally typical. Everything below comes from its own factsheet.

First, the fund on its own merits

Before any ethical question, the arithmetic.

The fund's stated objective is capital growth "through a consistent search for low volatility." Judge it on that.

Since launch it has returned +487% against +711% for its benchmark, MSCI World (May 2026) - a 2-percentage-point annual shortfall that compounds into roughly 28% less terminal wealth: on MUR 100,000 invested at launch, about MUR 223,000 less in hand today.

And the underperformance is consistent, not a one-off: the fund trails its benchmark over 1 year (29.9% vs 30.4%), 3 years (70.0% vs 79.6%) and 5 years (70.8% vs 91.1%).

And the factsheet doesn't provide the data to test its own low-volatility claim.

The baseline is a fund that underperforms.

Now the part nobody discusses.

What's actually inside

None of the fund's top disclosed holdings screen for anything. That matters, because cap-weighted global indices hold the entire military-industrial complex by construction.

We measured it two ways:

• As You Sow's Weapon Free Funds (https://weaponfreefunds.org/) grades a comparable global index ETF F, i.e., 94 flagged companies, 4.87% of assets. Nuclear weapons: 2.54%. Cluster munitions, landmines, white phosphorus, depleted uranium: 0.80%.

• FTSE Russell, applying its own weapons exclusion to the global parent index, strips out 426 companies, 5.09% of index weight.

  
  

Two unrelated methodologies, 22 basis points apart. Call it 5%.

The flagged names aren't only Lockheed and Raytheon, they include Palantir, General Electric, Caterpillar. You don't avoid this by declining to buy "defence (blood) stocks." It is woven into the index.

The usual objection

Screening costs money, and time, and is too much effort, and no one is doing it, and the system doesn't allow it. The argument goes. Ethics is a luxury.

So I tested it.

I rebuilt the fund's disclosed core, sleeve by sleeve, swapping each holding for the closest screened equivalent from a different manager: Vanguard, UBS, Amundi, Amana, Parnassus, derived from the weaponfreefunds' website.

Same market exposure. Same weights, renormalised. Weapons taken out.

Over five years, in rupees:

	5Y annualised	MUR 100,000 becomes
The fund	11.3%	170,800
Screened rebuild	~12.9%	~183,000
MSCI World	13.8%	191,100

The screened portfolio didn't cost the investor money. It returned about 1.5 percentage points more a year, which, compounded over five years, leaves roughly 7% more money in hand.

The finding underneath the finding

The rebuild beat the fund, but still lost to a plain MSCI World tracker by about a point a year. Where did that money go?

Not to the weapons screen. Over the same five years, MSCI's ex-controversial-weapons index returned 12.01% gross against 11.98% for its parent, effectively identical.

The money went to fees - roughly 1.7–2.0% of annual drag, once you count the 1% local charge on top of the underlying funds' own.

The trade-off investors think they face – returns versus values – is not the one they are making.

They are paying a fee stack to hold an index they could hold directly, and getting the weapons thrown in.

The honest caveats

This only means something if you can check it:

• Only 42.4% of the fund is disclosed. We say nothing about the other 57.6%.

• 38.6% of the simulated portfolio uses assumed returns - no five-year series was available for two of the SRI ETFs. The conclusion held across a wide range, but remains an assumption.

• The result is a weighted average of annualised returns, not a true time-weighted return. The fund's weapons exposure is inferred from its holdings, not measured.

• Past performance predicts nothing.

  
  

Every input comes with a caveat. Take it apart.

What to do with this

Most investors were never told they held stocks of companies whose products are responsible for the massacre of innocent civilians including women and children.

The 5% weapons exposure was not, I would hope, a decision.

It arrived by default, inside an index nobody explained. And the one defence for leaving it there, once you know, was always the same: the returns.

But that defence is gone. Over five years, the weapons didn't pay. They cost.

They cost you money, and they likely cost you your principles.

Now what’s left is a choice.

Some investors will weigh the exposure and keep it deliberately. Okay, call it legitimate if you wish, your choice.

What isn't legitimate is holding it against your principles and calling that neutrality.

What isn't legitimate is saying you cannot do anything about it.

Find out what you own. Then decide what you're willing to own.

It’s apparently very easy: https://weaponfreefunds.org/

Research and commentary prepared from publicly available information. Not investment advice, not a recommendation, not an offer. I hold no position in, and no relationship with, any fund or manager named. Past performance is not a reliable indicator of future results.