Canadian RI Funds Outperform Peer Benchmarks

(3BL Media/Justmeans) – Responsible Investing (RI), also known as Socially Responsible Investing, has consistently gained ground globally over the last few years. Large banks, mutual fund companies, and boutique investment firms now prefer to evaluate aspects such as the environmental impact, employee safety, women participation, and community engagement of a company, along with its financial prospects. However, the question of whether the investors will sacrifice returns or increase their risk with responsible investing continues to be asked, even though times have changed.

A new study, Canadian RI Mutual Funds Risk/Return Characteristics, commissioned by OceanRock Investments Inc., provides an insightful answer to this question. The study suggests that responsible investing promises strong financial returns combined with risk mitigation and more downside protection than traditional mutual fund investments.

The study examined the relationship between risk and return in Canadian RI mutual funds to determine whether RI funds are able to provide solid financial returns for investors while simultaneously reducing risk in their portfolios. The study looked at all of the approximately 100 RI funds in the Canadian marketplace and found that many are outperforming peer benchmarks.

Dr. Tessa Hebb, director of the Carleton Centre for Community Innovation at Carleton University, who conducted the study on behalf of OceanRock, said that their research indicates that RI funds are able to protect investors from downside risk in their equity portfolios. The correlation between RI and improved downside protections is significant.

Observations were compiled using one-year, three-year, five-year and 10-year fund data to the end of March 31, 2015. It was found that Canadian-based RI equity funds outperformed their non-RI peers 63 percent of the time on average, while Canadian-based RI fixed income and balanced mutual funds outperformed their non-RI peers 67 percent of the time.

According to the Responsible Investment Association of Canada, assets under management increased to more than $1-trillion by the end of 2013, a 68 per cent increase from two years earlier.

Source: The Globe and Mail                           

Image Credit: Flickr via Tom Gores