Ethical funds outperform non-ethical rivals
The past 12 months have been a notable period for ethical fund performance with the average ethical fund posting gains of 24% compared with 18% growth from the average non-ethical fund.
The latest survey from Investment Life & Pensions Moneyfacts survey examined the performance of ethical funds, conventional non-ethical funds, index trackers and the FTSE 100 over a number of investment periods (see table below). It also compared ethical funds within the three IMA sectors that contain the most ethical funds (£ Corporate Bond, Global and UK All Companies).
As the table below shows, ethical funds have also outperformed UK Index Trackers (23%) and the FTSE 100 (18%).
Richard Eagling, head of investments and pensions at Moneyfacts, said: "Ethical funds have clearly benefitted from their lack of exposure to 'unethical sectors' such as mining, oil and gas and tobacco, which have been amongst some of the poorer performing areas of the market over the last 12 months."
Over three years ethical fund returns have also edged ahead of non-ethical funds, with the average ethical fund up by 36% compared with growth of 31% from the average non-ethical fund, whilst after five years there is very little difference in performance levels.
At first glance, the 10-year performance figures are less flattering for ethical funds, with the average ethical fund growing by just 56%, less than half the growth of the average non-ethical fund (128%). But these figures are distorted by the fact that sectors such as China /Greater China and Global Emerging Markets, which have experienced extraordinary growth, do not house any ethical funds with a 10-year record.
However, comparing ethical funds within the three IMA sectors that contain the most ethical funds (£ Corporate Bond, Global and UK All Companies) shows that in each case there is only a small gap between ethical fund performance and their non-ethical peers. For instance, over ten years the average Global ethical fund is up by 127% compared with growth of 131% from their non-ethical peers. Furthermore, the top two performing ethical funds across all sectors over 10 years - Kames Ethical Equity (199%) and Ecclesiastical Amity International (188%) - have both delivered returns that overshadow many of their conventional rivals.