A WAR of words has erupted within the financial services industry, pegging both fund managers and research house analysts together, over an Australian university research study on socially responsible investments (SRI).
AMP Henderson Global Investors head of Socially Responsible Funds Michael Anderson has lashed out at an SRI report released by the University of Melbourne, claiming its findings do not truly represent the SRI asset class as a whole.
“It [the study] is pretty unrepresentative of SRI managers and not particularly helpful,” Anderson says.
The University of Melbourne report, released last month, revealed a 0.7 per cent per year loss on SRI investments compared to mainstream investments, based on the analysis of seven-year returns. The results were derived by leaving out shares from a number of industries that usually fall outside SRI funds, such as alcohol, armaments, gaming, pornography and tobacco.
However, according to Anderson, the university’s findings are at odds with SRI research conducted by AMP Henderson. He says AMP Henderson found the median SRI manager had in fact outperformed traditional asset classes in the past three to five years.
The AMP Henderson study analysed risk and return from all socially responsible Australian share funds in the Morningstar database and compared the SRI median with the ASX/S&P 200 index, the Salomon Smith Barney Growth index and the ASX Small Ordinaries index. The results revealed the SRI median outperformed the indexes by 2.5 per cent, 1.8 per cent and 10.3 per cent respectively.
“In the past it has been the assumption that it’s the heart leading the head [in SRI investing] and that returns suffer, but there is evidence SRI performance is in line with, or better, than traditional products,” Anderson says.
Also concerned with the Melbourne University SRI research findings is van Eyk head of SRI research, Dr Peter Smith.
Smith openly criticises the university’s report, claiming there are question marks over the types of funds surveyed.
“We would criticise this report. It doesn’t pay to be socially responsible in investing? It actually had to do with the funds they were looking at,” Smith says.
“Some [SRI] funds look at alcohol and tobacco and some SRI funds would invest in logging companies, [many] have different ideas on environmental sustainability. Some managers also believe that logging is a socially responsible activity,” he says.
