Exchange-traded funds tracking socially responsible indices (SRI) have outperformed their parent indices recently, according to Andrew Walsh.
The head of ETF sales for UBS told Investment Adviser’s Julia Faurschou that UBS has seen strong outperformance from many SRI indices over the past year or so.
UBS’s ETF range uses the SRI indices created by MSCI. These indices include just 25 per cent of the parent index to get what MSCI defines as an SRI index, and UBS tracks these for its ETF range.
Talking about the construction of these SRI portfolios, Mr Walsh said there are the usual companies excluded from the index - tobacco companies or weapons manufacturers, for example - but he added there are decent ‘good citizen’ companies with positive SRI profiles that just do not make the grade for the SRI index series.
He said: “For example, an interesting anomaly is that Apple is excluded from the SRI USA index, but this is not a reflection on Apple, just there are better companies out there which have met the criteria laid out by MSCI.”
Mr Walsh said that across Europe and the UK, SRI indices have been outperforming their parent indices and this was the situation more widely, except for the US SRI index where the strong performance of Apple has been one of several other factors helping the parent index to outperform.
However, he said that generally “good citizen” companies have helped the SRI indices to outperform. “Historically, people thought that if you wanted to be a good citizen investor, you had to pay the price in terms of performance. But the outperformance of SRI indices compared with the parent index proves you do not have to wear a millstone around your neck in terms of performance.
“In Europe, particularly, there is a good set of profiles from companies delivering on their promises and their ratings from MSCI have been very good indeed.
Mr Walsh said the natural underweight to energy in SRI indices would have helped performance, especially given the slide in the oil price affecting parent indices, over the past year or so.
email julia.faurschou@ft.com
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