On Fri, 12 May 2006 22:49:05 -0500, Will Trice <wwtrice[at]paragondynamics.com> wrote:
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So, on balance we could say that there is not a great deal of
difference, although the difference could be either a little positive
or a little negative, or none.

i

Sandra Loosemore wrote:

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Absolutely, I did not mean to imply otherwise. I was only talking about
averages, of course.

Will Trice <wwtrice[at]paragondynamics.com> writes:

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Not all socially-responsible funds have high expenses and loads.
OTOH, there are also plenty of non-socially-responsible funds that
have high expenses and loads, and plenty of investors who are ignorant
enough to pay them.

To me, as an investor, it is not very relevant or interesting whether
socially-responsible funds as a group have lower turnover or higher
expenses than their non-socially-responsible counterparts. I'm only
interested in comparing the merits of individual funds, rather than
average statistics about a fund category as a whole. (As I pointed out
in a previous message, I've invested some of my money with Ariel and
Bridgeway because they run good funds, not because those funds fall into
the socially-responsible category.)

-Sandra the cynic

Ignoramus6482 wrote:

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The performance differences noted in the paper I cited were derived from
actual fund results taken from the Survivorship Bias Free Mutual
Fund Database from the Center for Research in Security Prices at the
University of Chicago (see page 10 of the paper), not from a statistical
model.


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It's not clear to me that an "ethical" fund is synonymous with a
"socially responsible" fund. Is it?


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This paper is looking only at bond funds. I don't think the results are
a surprise, but I'm not a bond investor.

- quote -

You asked for a study that compares funds with similar allocations, but
this paper selects the conventional funds from a random set with similar
asset size to the SR funds.


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This study focuses on indices rather than actual funds: "In contrast to
earlier studies on the performance and risk-return characteristics of
SRI equities this study concentrates on SRI indexes and not on
investment funds."

- quote -


This may or may not be true, we seem to disagree. But you are correct
that socially responsible funds
have lower turnover (this is a surprise to me). But they also have
higher expenses and loads.

-Will

On Thu, 11 May 2006 22:40:49 -0500, Will Trice <wwtrice[at]paragondynamics.com> wrote:
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Thank you Will, that was an interesting article. I think that it
discussed hypothetical performance of screened funds under certain
statistical assumptions, assuming stock prices being perfect random
variables that follow a known distribution, not actual performance.

I looked for some references on google scholar, here is a little
attempt at a summary of what I found:

1)
http://www3.interscience.wiley.com/c...TRY=1&SRETRY=0

``We find no statistically significant differences in the mean returns
of unscreened and screened equity universes for the 1987-94 period.''

2)
http://www.blackwell-synergy.com/doi...X.2005.00636.x

``The findings suggest that there is no difference between ethical and
non-ethical funds according to the performance measures
employed. Neither type of fund displayed any ability to time the
market.''

3) http://www.fma.org/Chicago/Papers/SR...ds_11_1_05.pdf

``our models predominantly point to a positive but insignificant
performance differential between SRI funds and their conventional
peers...'''

4)
http://www.blackwell-synergy.com/lin...5.00113.x/abs/

``I use a sample of socially responsible stock mutual funds matched to
randomly selected conventional funds of similar net assets to
investigate differences in characteristics of assets held, portfolio
diversification, and variable effects of diversification on investment
performance. I find that socially responsible funds do not differ
significantly from conventional funds in terms of any of these
attributes. Moreover, the effect of diversification on investment
performance is not different between the two groups. Both groups
underperform the Domini 400 Social Index and S&P 500 during the study
period.''

5)
http://www.nachhaltiges-investment.o...-Studie-05.pdf

``SRI indexes exhibit the same performance as the benchmarks and that
differences in risk-return characteristics primarily stem from risk
differentials''

These studies studied actual performance data of actual funds. I am
sure that I missed some important studies.

To me, SRI is financially equivalent to selecting a random (from the
standpoint of expected return) subset of stocks and then doing the
same things fund managers do normally, but within that subset. If
being within a smaller subset makes these managers incur lower
transaction costs due to trading less, they are likely to experience
slightly better returns over time.

i

John Gunn <noway[at]forgetit.org> writes:

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I suggest that people interested in this universe consider funds
individually instead of as a group. :-) No fund category is exempt
from the normal rule of thumb that 90% of everything is crap. :-P

I mentioned Ariel in a previous post. In their case, they avoid
tobacco and nuclear power stocks because they think the liability
concerns make them bad long-term investments, not because they want to
pat themselves on the back for being "socially conscious".
Personally, the reason why I like this fund house is because I like
their investment style, and their shareholder reports are among the
best in the business, so I understand what they are doing with my
money and why.

-Sandra

Ignoramus11506 <ignoramus11506[at]NOSPAM.11506.invalid> wrote in
news:kDR8g.28300$Vz4.28052[at]fe31.usenetserver.com:


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But if one is interest in this universe they should consider Ariel funds.

Ignoramus11506 wrote:

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I would be surprised if this were the case. See
http://papers.ssrn.com/sol3/papers.c...ract_id=416380 for instance.

-Will

On Thu, 11 May 2006 19:05:08 -0500, joetaxpayer <joetaxpayer[at]nospam.com> wrote:
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Joe, I am curious if there were any studies comparing performance of
socially conscious funds vs. general funds with similar allocation
strategies.

My own hunch is that the socially conscious funds would have slightly
lower turnover and thus could outperform general funds by a tiny bit.

i

- quote -

It's been several years since I looked into socially responsible investing.
I did order a Pax World Prospectus and Annual Report. I was somewhat
surprised at some of the companies they refused/were willing to invest in
and realized that their definition of socially responsible was very
different from mine. I think that when it comes to living up to your values,
it's best not to trust others to define your values for you.

Elizabeth Richardson

benjamin wrote:

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Well, Domini is synonymous with social investing, so much so that an
index, the DSI 400 was created to track such stock.
I had the good furtune to hear her (Amy Domini) talk at a planner's
conference (Dan Fuss spoke there as well) and I have to say, she spoke
with an abbundance of knowledge, and defended herself against the
charges that by limiting her choices of companies, she'd produce
inferior returns.
JOE

"benjamin" <benjamin.niesen[at]gmail.com> writes:

- quote -

Well, you won't find that here. :-P If you want professional advice,
go to a fee-based financial planner. If you want free advice on the
net, it might not be worth any more than you pay for it. :-P

- quote -

A couple fund shops not on your list that emphasize socially
responsible investing are Ariel and Bridgeway.

-Sandra

I have researched this topic a lot and it has really attracted my
attention. I am currently investing is some mutual funds that are
doing really well, but as most investors, I had no idea what companies
I was actually supporting. I want to put my money where my values are
and that is what lead me to these types of funds. I foresee growth in
Alternative Energy due to extremely high gas prices, with no end in
site. I am looking for some semi-professional advice as to which funds
would be good to invest in. Here are the funds that I am currently
looking in to.

Calvery
Citizens Funds
Domini Social Investments
Green Century Funds
Guinness Atkinson Alternative Energy Fund
New Alternatives Fund
Pax World Funds
Portfolio 21
Sierra Club Mutual Funds
Winslow Green Growth Fund


Any comments or ideas would be appreciated.
Thank you.