Date of Award

2002

Degree Type

Thesis

Degree Name

Bachelor of Business (Hons.)

Faculty

Faculty of Business and Public Management.

First Advisor

Marilyn Clark-Murphy

Second Advisor

Paul Gerrans

Abstract

Socially Responsible Investment (SRI) has seen a remarkable growth in recent years – primarily in the US and UK, but also in other markets including Australia. This growth, along with the development of corporate social responsibility, is suggested to be a result of increased awareness in social, environment and human rights issues. The literature offers several suggestions as to how SRIs and SRI funds may differ from other investments, as financial assets. It has been suggested that SRIs are more likely to represent smaller stocks, and also more likely represent growth rather than value stocks compared to non-SRIs. Furthermore, different hypotheses are presented on whether SRIs are likely to give higher or lower returns than other investments. Such assumptions have implications for portfolio diversification in regards to SRI funds. This study investigates whether there is evidence to support the assumption that Australian SRI funds are different, from a financial asset perspectives, compared to non-SRI funds. A sample of six general and four superannuations SRI funds is surveyed and compared to a general managed fund benchmark index and a superannuation fund benchmark index. A four-factor Jensen alpha is used to assess fund performance, providing little evidence of any consistent and significant differences in returns between SRI funds and the respective benchmarks indices. Returns-based style is applied in order to detect differences between the SRI funds and the benchmark indices in exposures to asset classes and industry sectors. The results show little notable consistent patterns of differences in investment style, but provide mild support to the assumption of SRI funds having heavier exposures to smaller stocks. Also, the SRI funds tend to have higher exposures to cash compared to the relevant benchmark indices. The most prominent result from the study is that the SRI funds differ markedly amongst themselves in terms of exposures to asset classes and industry sectors. They can therefore not be categorised under any particular investment style category, and should not be treated as a homogenous asset class.

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