Thu, Apr 24, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

EDHEC-Risk Institute finds no new evidence that SRI funds create financial value

Tuesday, September 14, 2010
Opalesque Industry Update - In 2008, EDHEC-Risk Institute analysed the performance of a sample of SRI funds distributed in France, covering a six year-period from January 2002 to December 2007. This study concluded that none of the funds in the sample produced both positive and statistically significant alpha.

In a new position paper entitled “The Performance of Socially Responsible Investment and Sustainable Development in France: an Update after the Financial Crisis,” EDHEC-Risk Institute again finds that a majority of the funds studied over long or short periods produce negative but non-significant alpha.

To highlight the period of the financial crisis, the new study examines SRI funds over both a fairly long period, with eight years of data, ending in December 2009, and a shorter period of three years, including data from January 2007 to December 2009.

Including the period of the financial crisis increases the extreme risks borne by SRI funds considerably; it is clear that, on average, these funds provide no protection from market downturns.

Regarding SRI investments more globally, the three main comments are the following:

1. The study confirms EDHEC-Risk Institute’s previous results on SRI as presented in the 2008 position paper. At this stage it has not been shown that the SRI approach on its own creates value in the financial sense of the term.

2. This does not mean that extra-financial criteria should not be taken into account, but they cannot be the only foundation for sound portfolio management.

3. EDHEC recommends that SRI be integrated in a more global process whereby the results of fifty years of quantitative research in finance are not abandoned in favour of a solely qualitative approach. As such, an approach that combines stock picking with SRI criteria and a well-diversified portfolio construction methodology can be an alternative to pure SRI, which is often practised with relative risk constraints linked to poorly diversified and inefficient cap-weighted indices.

The EDHEC-Risk Institute Publication, “The Performance of Socially Responsible Investment and Sustainable Development in France: an Update after the Financial Crisis” can be downloaded here: Source


(press release)


EDHEC-Risk Institute is part of EDHEC Business School, one of Europe’s leading business schools and a member of the select group of academic institutions worldwide to have earned the triple crown of international accreditations (AACSB, EQUIS, Association of MBAs). www.edhec-risk.com


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. …And Finally – Flight attendant has passengers rolling in aisle[more]

    From Orange.co.uk: A video of a US flight attendant turning her safety talk into a comedy routine is proving a huge hit online. More than five million people have watched the clip of Marty Cobb which has her passengers rolling with laughter on a Southwest Airlines flight to Salt Lake City.

  2. Niche Investing – Wealthy investors flock to fine art funds[more]

    From Clickorlando.com: Wealthy investors looking to diversify beyond stocks and bonds are now turning to an unusual money-making vehicle -- the art investment fund. The name says it all: These funds invest in fine art and seek returns by acquiring and selling high-end pieces for profit. Growth

  3. Opalesque Exclusive: Rainwater and Blue Sky - an Australian water fund emerges[more]

    Bailey McCann, Opalesque New York: Financial reporters often tout new funds and investments as uncorrelated investments, but few can say they are uncorrelated to everything but weather. Enter Blue Sky Alternative's water fund which invests in the permanent rights to Australia's water. Sev

  4. University of Michigan allocates $242m to six managers[more]

    From PIonline.com: University of Michigan, Ann Arbor, invested or committed a total of $242 million to one traditional equity manager and five alternative investment funds from its $9 billion endowment. University regents approved the hire of Mittleman Investment Management to run $35 million in act

  5. Performance – Odey flagship hedge fund suffers brutal March as shorts rise, Blackstone first-quarter profit rises 30% on higher fees[more]

    Odey flagship hedge fund suffers brutal March as shorts rise From Valuewalk.com: The tide has turned for the worse for one of Europe’s best performing hedge funds. Crispin Odey’s flagship hedge fund, Odey European has suffered a 4.63% decline for the year after slipping 7.2% in March, ac