Experts analyse 'volatile' ethical funds

Social responsibility investment funds are facing tough times but remain popular with customers, experts have said.

Ethical investments continue to attract inflows from investors despite the credit crisis and economic downturn - and this trend looks unlikely to reverse soon, the Observer reports.

The F&C Stewardship fund, the UK’s first ethical fund, was officially launched 25 years ago - and the sector has been growing ever since.

However, analysis from financial group Investment, Life & Pensions Moneyfacts cited by the newspaper showed last year that prevailing financial trends had severely damaged many socially responsible investment funds.

The study showed that seven of the 57 funds studied had registered positive growth over the last year.

Typically, an ethical fund was found to have fallen by 9.1 per cent in value over the 12-month period, a sharper decline than the 5.7 per cent average for all investment funds.

Simon Brett, head of investments at Parmenion Capital Partners, told the newspaper that the funds’ popularity would continue.

’Investors might question whether they want to be in equities at all, but I don’t think they’ll just drop ethical funds,’ he said.

’In fact, I can’t see demand trailing off - it’s a growing market.’

Also speaking to the Observer, Jonathan Clark at financial adviser Barchester Green said: ’Ethical funds do tend to be a little more volatile.

’In bad markets they tend to come down rather more quickly; but in good markets they tend to go higher.’ADNFCR-2318-ID-19207428-ADNFCR