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  • 1.  SRI Returns

    Posted 04-09-2006 11:19



    One thought for those who advocate teaching social investing as a stand-alone course: Would you advocate teaching astrology as a stand alone course, or rather critiquing it in science classes?


    Mike:

    I'd be interested to know:

    1. the source of your data
    2. how you analyzed the data, as you well know, SRI data can be analyzed based on screens, overall size of investments, etc. An underperforming $1.2 billion fund should by my measure be given considerably more weight than a $50 million fund.

    I have not crunched the numbers in this formal way, but a review of the performance data certainly suggests a radical downward shift in the performance of broadly screened "socially responsible" stocks since end of year 2000. (Note that the evidence suggests that environmental screens, which sometimes uses hard data (subjectively applied) instead of blatantly ideological screens have been more consistent.)

    This morning, I looked at the New York Times Mutual Fund rankings, which uses Lipper data and cross referenced it against the Social Investment Forums list of funds that:
    1. have stock assets of more than $100 million
    2. use a broad range of screens (eg: that includes most funds in groups such as Calvert, Domini, Neuberger Berman, Parnassus, Smith Barney but excludes narrowly focused screened funds such as Ariel, Dreyfus, Winslow Green Growth, etc.)

    16 funds fit this group and were ranked for the 3-year performance. According to the Lipper rankings, here as how they broke down in the # ratings from 5 (best) to 1 (worst):

    5   -- 3 funds  (all Calvert funds, under a new portfolio manager
    4 - 0 funds
    3- 4 funds
    2- 5 funds
    1 - 4 funds

    Fully 9 of 16 underperformed its peers while only 3 of 16 - or 19 % -- outperformed its peers.

    When you look at "index" funds, the performance is even worse. Calvert Social Index is performing in the bottom 19% this year, the bottom 31 % last year, the bottom 18% in 2004, and the bottom 21% in 2003.

    While the Domini Social Index is ranked a solid C or D over the past 1, 3 and 5 year period. It's currently ranked in the bottom 27%, was in the bottom 40% last year, and the bottom 37% over three years-a D quintile ranking. It's 10 year ranking, as with many other "socially responsible funds", ranks as a soft "B" -- in the top 34%.

    Almost all the major SRI funds I've looked at track this way. Competitive 10 year rankings because of the sector bets on high tech and communications companies in the 1990s and dramatic underperformance since.

    A lot of this doesn't show up in the highly-biased, selectively presented "studies" by SRI supplicants whose academic careers depend on promoting the factually untenable idea the "socially responsible" stocks outperform.

    I think it's revealing that Green Money and the SIF and other embarassing SRI trade groups were as of 2005 no longer publishing comparative Lipper and Morninstar comparisons for each fund, as the data turned increasingly dark, and blew a huge whole in their marketing deception.

    I'd be interested in seeing you you cracked your numbers.


    --

    Jon Entine
    American Enterprise Institute
    http://www.jonentine.com

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