There are only six mutual funds labelled “impact” available for investors in Singapore. Only two have more than three years track record.
Funds that are categorised as “ethical/sustainable” are more numerous. There are 74 funds with a track record more than one year, 11 of which are ETFs. Eight of them are bond funds. The rest are equities — Asia (6), emerging markets (7), European equities (3), US equities (3) and the remaining 43 are global equities.
FSA took another look at the funds categorised as “ethical/sustainable” to gauge their performance versus their conventional peers. In this quick bit of quantitative research, the focus is on the category with the most funds: global equity. We mapped the performance of the ethical/sustainable funds versus the 237 conventional global equity funds registered for sale in Singapore and versus conventional equity ETFs.
The resulting research shows that the median three-year cumulative return of the two sets of funds on 31 October was approximately equal: 21.12% for the conventional funds (including ETFs) and 21.77% for the ethical/sustainable funds.
However, the highest median (26.1%) was from conventional ETFs alone.
Although there was a huge disproportion in the number of ethical/sustainable funds (35) compared to conventional equity funds (255), the former had better performance on a percentage basis.
Nine out of the 35 ethical/sustainable funds with three or more years of track record, or 26% of the sample, did better than the MSCI AC World Index, which returned 27.8% during that time. Among the 255 conventional funds, only 46, or 18% outperformed the index.
Therefore, one conclusion is that if investors, three years ago, randomly chose an ethical/sustainable equity fund instead of a conventional one, they would have had a better chance of outperforming the index today.
Nonetheless, about 75% of ethical/sustainable funds underperformed the index over three years.
The two funds with a three-year track record carrying the “impact” label, the Parvest Climate Impact Fund and the NN Global Equity Impact Opportunities Fund returned 25.9% and 16.2%, both underperforming the global index.
Three-year return of impact, ESG and conventional funds and ETFs
Data: FE, 31 October 2017, cumulative returns in US dollars
