RI funds grow more quickly and outperform average mainstream funds in Australasia: RIAA report

Australian investment funds using responsible investment criteria have grown assets more quickly in the last year and on average outperformed their mainstream investment fund peers over one, three, five and seven years according to the Responsible Investment Association Australasia (RIAA). The RIAA 2011 Responsible Investment Annual shows a notable rise in hard asset growth in what it calls ‘core’ RI portfolios. It reveals that managed responsible investment portfolios – defined as separately managed share portfolios, listed investment companies or discrete ESG screened investment mandates – rose by 7% or Aus$1.1bn in the financial year to June 30, 2011, from $15.41bn to $16.52bn. The asset growth outstripped the broader market where total assets under management of all types of managed portfolios rose 1.8% over the same period. It takes total RI ‘core’ assets to 1.76% of the total $936.01bn Australian funds market, based on Morningstar market data. The figure was 1.67% in 2010 and 1.15% in 2005, remaining relatively small but growing consistently. The investment outperformance of the average RI fund occurred across Australian and international shares and balanced funds. Using data from CAER, the Australasian ESG research house, the survey compared the average return of the sample of RI funds inthe universe with the average return for mainstream funds. Over three years, the 30 RI funds investing in Australian equities returned an average of 0.98% against 0.26% for the average market fund, although the number of mainstream funds is much larger. Over five years, the performance was 2.38% against 1.65% respectively. The performance differential was broadly similar in international equity and balanced funds. In its breakdown of overall growth of the RI market in Australasia, including New Zealand, RIAA splits the market into core and broad components with the latter including the integration of ESG issues into financial analysis, company engagement and share voting. For the ‘core’ market, the 7% growth in RI managed portfolios was added to by 19% growth in community finance investment and an 8% rise in a separate category of portfolios managed by financial advisers. Cumulatively, they boosted the core RI market to $19.5bn from $18.1bn in 2010, a rise of 8%. For the ‘broad’ ESG market, however, which includes ESG integration, corporate engagement and shareholder activism, the value of assets covered by these approaches almost doubled in the year from $74.8bn to $148.9bn, a rise of 99%.
Link to RIAA report