Gee, right after we finished writing our 5-part series on SRI Trends, SocialInvest.org released its latest survey on the subject. I read the report to determine if there were any changes worth talking (actually more like writing) about.
The biggest change, or more like surprise, was the continued growth in SRI assets, despite the troubling waters of capital markets. In fact, SRI has not only become increasingly popular, but Hip! From the start of 2007 to the beginning of 2010, SRI assets increased more than 13%. Total AUM was $3.1 trillion excluding the effects of overlapping strategies. (See table). This compares with anemic growth of 1% for overall professionally managed assets. Demand for Socially Responsible Investments has come from the “grass-roots” efforts of investors, and not from the institutions (or their portfolio managers) themselves.
The fastest growth of what’s categorized as ESG investing vehicles was what is called Alternative Investment Funds. The Social Investment Forum Foundation identified 177 of these vehicles with AUM of $37.8Bn. Alternative investments vehicles include ones I’ve focused on in my 5-part Series such as Hedge Funds (mostly quant funds) as well as private equity. Can private equity really do good, or is this an oxymoron?
The number of alternative investment vehicles incorporating ESG criteria increased 285% since 2007, while AUM grew an even faster 6x. Surprisingly, leading investment criteria were clean technology versus what I had expected would be quantitative funds that screen.
On the U.S. Registered side of SRI, there were 281 mutual funds with $320.3Bn under management. Most of this was to the ever familiar mutual funds. The smallest share was to Closed-end funds (just a bit over $200MM). However, the fastest growth was in Exchange-Traded-Funds (“ETFs”) growing 225% since 2007, to $4Bn. While still a relatively small AUM, we expect ETFs to continue leading the way in SRI. As mentioned previously, we like the growth being witnessed here, but are disturbed by the disassociation of the individual investor from the ETF’s investments, and the tendency of ETFs to become like casinos. (Please review Part V of our SRI Trend series for additional information.)
Going forward, I continue to expect ETFs to grow quickly as well as Social Venture Capital and Private Equity. As you know, I’m no fan of ETFs or of Private Equity. However, Social Venture Capital (and Social Enterprise) are areas I believe SRI can really make a difference in society.
The question is: Would you rather help society, or make a quick-buck investing in an ETF ?