Not surprisingly, the UNIFEM Fund holds a broad range of stocks across a wide range of sectors. Its top ten company holdings range from oil, information technology and engineering, to financials, consumer plays and mobile firms.
Firms in the U.S. and Europe make up over 60% of the fund’s holdings. Japan accounts for about 6%.
For all its good intentions, the Fund has not been doing too well. According to Lipper, the UNIFEM Fund has underperformed against the MSCI All Country World Index, returning 10.29% against the index’s 13.26%.
Since its inception nearly eight years ago, NAV is at 0.32% compared to MSCI’s 2.41%
The underperformance is broadly in line with most SRIs in Asia. SRIs are new to Asia. According to Credit Agricole, the global market for ethical funds is worth about $4.2 trillion, with Asia accounting only for $2.5 billion.
"In the U.S. and European countries, SRI funds are outperforming as social and environment issues are well known, but we believe they will also track and outperform global indexes in Asia in the long run," says fund manager Kanise Chan.
In the U.K., the average return from ethical funds over the past three years is about 57 percent.
But the winds do appear to be changing in Asia. The Korea Times, citing fund evaluating firm Zeroin, reported that nine SRI funds with over one billion won ($1.1 million) of assets under management, showed returns similar to those of stock funds which have gained 45 percent over the past six months.
Melissa Brown, Executive Director at the Association for Sustainable & Responsible Investment in Asia says it is also critical to look at the structure of the fund. "SRIs are not a homogeneous asset class, some are growth funds, and others, like the UNIFEM fund, are value driven," says Brown.
Brown notes that given the fund’s stated goals of promoting women’s causes, investments will tend to consist of companies from developed countries, and these firms are more than likely to be stable, large cap companies with long histories of progressive human resource policies.
"These companies are usually not in highly cyclical industries like technology, where the focus is on growth and stock options, and where staff turnover is high. More likely, they have high staff retention rates, and manage their workforces with a longer term view," Brown adds.
Another important factor is the state of global equity markets. "In the current high liquidity environment, I’d be more worried if a growth fund underperforms, not a value fund," says Brown. "The fact is, globally, there is a segment of the population that wants to invest where their values lie, and are willing to take a longer view and accept some underperformance."
Ultimately though, fund managers and Brown alike recommend the same proven strategy when investing in ethical funds like the UNIFEM fund: Do your due diligence, and decide if the fund’s investment principles match your expectations (and expected returns).
And do not put all your eggs (free range or otherwise) in one basket. Fund managers recommend spreading them between a number of ethical funds and/or other funds to reduce damage to your portfolio if one underperforms.
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