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performance is not everything, says Kiernan

December 2001

Investors and analysts should drop their ‘absurd’ preoccupation with whether socially responsible investment funds outperform or underperform mainstream funds, according to a senior figure in the field.

Matthew Kiernan, founder and managing director of the New York-based investment research company Innovest, told a London conference that an unreasonable amount of attention was being paid to comparisons between the performance of SRI funds and mainstream investment funds.

‘To ask about outperformance is a specious question,’ he told delegates at the Cadogan International conference on SRI for institutional fund managers.

‘The obvious answer is that sometimes, on some funds, and using some investment styles, yes, SRI will outperform the mainstream. But that will not always be the case, and SRI has so many different strains and hybrids that to ask a generic, one-size-fits-all question about whether it underperforms or outperforms is frankly absurd.’

Kiernan said analysts and investors would do better to view SRI as one of the few reliable ways, in a world where intangibles have become the main component of company value, of identifying risks and good management within companies. ‘In the 1930s about 30 per cent of a company’s value was represented by intangible assets but now that’s up to 85 per cent,’ he said. ‘This is not something that either Wall Street or the City has kept pace with.

‘Conventional accounting numbers are becoming increasingly useless in this context and yet the SRI community finds itself very much on the analytical defensive. It shouldn’t be,’ Kiernan said.




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