Socially responsible investments are getting smoked by socially irresponsible investments

Sex sells. So do drugs, booze, tobacco, and guns.

In its new Global Investment Returns Yearbook, Credit Suisse compared two mutual funds that launched around the same time in the early 2000s with vastly different investment strategies - one socially responsible, the other less so.

They found that "sin" pays.

Specifically, the Vice Fund - which invests in tobacco, booze, gaming, and defense - crushed Vanguard's FTSE Social Index Fund - which invests in companies with strong environmental policies and good track records of workplace safety and promoting minorities and women.

Since its inception in 2002, the Vice Fund returned 236% while Vanguard's fund returned 167% during the same period.

And yet the popularity of socially responsible investing is growing, according to Credit Suisse. Despite poorer performance, the Vanguard fund's assets under management ($1.5 billion) are five times the size of Vice's ($290 million).

Ironically, altruistic investors could be responsible for higher returns on the "sin" stocks, Credit Suisse noted. By avoiding the those companies, they undervalue the stocks, which can lead to higher returns in the long run.