Responsible investment outperforms ASX 300: Lonsec
Responsible investment is giving investors more than a warm fuzzy feeling inside, according to research house, Lonsec.
Lonsec's 2014/15 Australian & Global Equity Responsible Investment Sector Review, highlighted the positive performance and reduced volatility of responsible investment equity funds.
The report found that Lonsec's Australian equity responsible investment peer group average returned 15.7 per cent for the year to August 2014 and 17.1 per cent per annum for a three year period, outperforming both the ASX 300 index (14.2 per cent for the year to August 2014 and 14 per cent a year for the three year period) as well as the Lonsec ‘core' Australian equity peer group (13.8 per cent and 16.6 per cent annually over the same periods respectively).
Steven Sweeney, Senior Investment Analyst at Lonsec, said the results refuted the "common misperception that responsible investment will not achieve a reasonable rate of return".
"While a niche segment, a number of the funds have generated a strong alpha track record over a reasonable period," he said.
"The challenge for advisers is to recommend the right funds that align with their clients' ethical investment motivation.
"Traditional ethical funds have different approaches to ESG funds. For example, some fund managers, such as Perpetual, Australian Ethical and Hunter Hall are providing fossil fuel free options within the Lonsec universe while other Funds are not exempt."
While the report highlighted the success of responsible investment funds, it noted that they were "more likely to struggle when compared against the benchmark and mainstream peer funds in strongly rising or resource driven markets".
However, it also reported that "most Australian equity responsible investment funds recorded lower volatility than the index over one and three year periods".
AUTHOR
Nicholas O'Donoghue
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
