A sensitive issue confronts pension funds: what investments to make and still remain socially responsible?

One answer is to increase mortgage-related holdings, according to Georgetown University Law Center professor Roy L. Schotland.He will be among the speakers at a meeting of the Association of Private Pension and Welfare Plans opening Wednesday at the Hyatt Regency.

Schotland, who teaches one of the few university pension law courses in the country, became interested in the issue when he did a study of institutional investors for the Securities and Exchange Commission. In the conflict that has raged for several years over whether pension funds should be used to make investments benefitting causes like unionism, environment or equal opportunity -- even though such investments often earn less money for the funds' beneficiaries -- Schotland has held firm to the premise that the rate of return on investment is primary.

Yet he now believes that socially conscious fund managers can have their cake and eat it too by investing more money in housing through the purchase of securities and pass-through certificates backed by pools of mortgages. These are issued by the private and government-chartered corporations that make up the secondary mortgage markets. Nicknamed after their issuers, these securities bear quaint names like Ginnie Mae, Fannie Mae, Freddie Mac, Connie Mae, Maggie Mae, Pennie Mae and, even, MacMumbles (Merrill Lynch's).

Because of these offer high yields and little risk, they represent prudent investments for money managers entrusted with the future retirement benefits of employes. At the same time, buying them serves a useful social purpose by bolstering the housing industry at times of scarce financing.

The pension funds of public employes are far more heavily invested in mortgages than are those of private industry. Yet there are indications more private funds, traditionally invested in stocks and bonds, are becoming interested. Ten Southern California union leaders, representing the construction trades and $2 billion in pension assets, announced recently they are considering investing up to $100 million a month -- 60 to 70 percent of their assets -- in building loans.