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- Title
Helping Clients Select SRI Mutual Funds and Firms.
- Authors
Chieffe, Natalie; Lahey, Karen Eilers
- Abstract
• This study examines research on socially responsible investing mutual funds that includes definitions, strategies, and performance as a background for understanding the concept and its investment applications. The definition of SRI is a function of the individual's or funds' viewpoint and the specific criteria they are willing to adopt. There is no generally accepted definition. • Major strategies for SRI are screening of stocks, shareholder advocacy, and community investing. • Advisors can choose from four different SRI indexes for use as benchmarks, but the indexes overlap significantly in the firms included in the indexes, so advisors must choose carefully. • Most previous studies have found no statistically significant difference between the risk-adjusted returns of SRI mutual funds when compared with the returns of conventional funds, and our results support this finding. SRI investors are not sacrificing returns. • The average annual return for the 78 SRI funds selected for this study is 4.8 percent, while the return on the S&P 500 is 2.95 percent and the return on the Domini Social 400 Index is 2.0 percent. For the sample period of 2001 to 2006, the risk-adjusted return (RAR) on the mutual funds is 37.3 percent, the S&P 500 is 21.2 percent, and the Domini Social 400 Index is 14.0 percent. • We report the overall returns for 11 individual screens used to identify specific types of socially responsible investing. Financial planners can determine which kinds may be most appropriate for their clients based on the specific criteria discussed and the results provided in this study.
- Publication
Journal of Financial Planning, 2009, Vol 22, Issue 2, p60
- ISSN
1040-3981
- Publication type
Academic Journal