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Do Social Responsibility Screens Really Matter? A Comparison with Conventional Sources of Performances

 

On average, socially responsible (SR) funds have showed statistically similar performances to traditional funds. Does this mean SR screens make a negligible contribution to fund performance? In this paper, we propose a new decomposition of the variability of mutual fund returns. This allows us to measure the performance contributions of SR screening compared with the other traditional sources: market movement, asset allocation choices and active management. Our results, based on a large sample of equity mutual funds worldwide, show that SR screening does explain the variability in mutual fund performance, alongside asset allocation and active management. However, the sum of these three components accounts only for 30% of total performance. SR screens matter but, like active portfolio choices, they have a limited impact on total equity fund performance, heavily dominated by market movements.

 

October 2014 (First version) : "Do Social Responsibility Screens Really Matter? A Comparison with Conventional Sources of Performances"

 January 2017 (Revised version) : "Do Social Responsibility Screens Really Matter when Assessing Mutual Fund Performance"

Marie BRIERE, Head of Investor Research Center at Amundi
Jonathan PEILLEX, University of Picardie Jules Verne
Loredana URECHE-RANGAU, University of Picardie Jules Verne

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Do Social Responsibility Screens Really Matter? A Comparison with Conventional Sources of Performances
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