Do Socially Responsible Mutual Funds Measure Up?

Abstract

This abstract was created post-production by the JFI Editorial Board.

This paper examines characteristics, risk and performance measures of all available socially responsible funds (hereafter SRFs) in the U.S. mutual fund industry. In this study, SRFs include actively-managed funds and index funds. The two issues to be addressed are: (1) Do SRFs as a whole perform as well as the average of all mutual funds in their respective categories? and (2) Do actively-managed SRFs outperform index SRFs?

The authors of this study find SRFs, as a whole, when compared with the average of all mutual funds in the same category, exhibit LOWER measures in most categories. "Do good" SRFs, with the exception of some bond categories, did not perform as well as other mutual funds in their own categories over the past fifteen years. Actively-managed SRFs as a whole, compared with index SRFs, appear to exhibit mostly higher measures over the three- and five-year periods.