Download Canadian Responsible Investment Mutual Funds Risk / Return

Canadian Responsible Investment Mutual Funds
Risk / Return Characteristics Study
Executive Summary
Carleton Centre for Community Innovation
June 1st, 2015
Canadian RI mutual funds risk/return characteristics – Executive Summary
June 2015
Responsible Investing is a growing trend
1
In a recent survey , over 90% of Canadians said they are interested in Responsible Investing (RI).
According to a report from the Responsible Investment Association of Canada (RIA), at the beginning of
2014, RI assets stood at more than $1 trillion, a remarkable 68% increase in two years. The RIA report also
showed that growth in Responsible Investment mutual fund assets outpaced non-RI mutual funds — 52% vs.
2
30% — over those same two years .
At OceanRock, our family of Meritas SRI Funds embodies a compelling value proposition — do well, doing
good. We believe investors can earn competitive financial returns, while influencing positive, measurable
change through shareholder engagement, positive and negative
screening and Community Development Investment initiatives.
This study shows that
Along with others in the RI industry, we have long believed that the
best companies to invest in are those that are committed to strong
environmental, social and governance performance. It stands to
reason that those companies tend to be more efficient and productive,
more respected, and better able to mitigate risk for investors.
Responsible Investment
funds protect investor
capital better than nonRI funds
The strong financial performance of Responsible Investments over the past decade has helped reassure
investors that investing responsibly can deliver returns comparable to non-RI investments. Yet the notion that
a Responsible Investment approach can help reduce portfolio risk has lacked supporting data. Until now.
The evidence is in
A new study commissioned by OceanRock shows that Responsible Investment funds protect investor capital
better than non-RI funds (see full report for details). In particular, RI equity funds showed strong risk
characteristics in their ability to:

Deliver a better financial return at a given level of risk; and

Protect investor capital by mitigating losses in down markets
To produce the study, Canadian RI Funds Risk / Return Characteristics, OceanRock commissioned Dr.
Tessa Hebb and the Carleton Centre for Community Innovation in early 2015. Dr. Hebb compared Canadian
Responsible Investment mutual funds across various asset classes to comparable non-RI funds. She looked
at returns over standard performance periods alongside several risk parameters. This approach revealed
how both performance and risk metrics measured up for RI funds versus an average of comparable non-RI
mutual fund.
Standard Life (2011) Socially responsible investing consumer driven: Ipsos survey, press release, October 27, 2011, Ipsos Reid/Standard Life,
Canada.
1
2
2015 Canadian Responsible Investment Trends Report, Responsible Investment Association of Canada
Canadian RI mutual funds risk/return characteristics – Executive Summary
June 2015
Key Findings

We
find that
thefunds
SRI equity
mutual
funds in
Canada their
examined
in this
study,
RI equity
mutual
in Canada,
financially
outperform
respective
peer
benchmarks
63% of the time.
financially
outperform their respective benchmarks 63% of the time.

We
find that
thefunds
SRI equity
mutualpeer
funds
outperformed
risk
measurement
RI equity
mutual
outperformed
benchmark
key risk
metrics
55% of thestandard
time,
industry
benchmarks
55%
of
the
time,
demonstrating
the
ability
for
SRI funds to
demonstrating the ability for RI funds to reduce risk in investment portfolios.
reduce risk in investment portfolios.

These
findings are particularly strong for Sharpe ratios and Sortino ratios that
These findings are particularly strong for Sharpe ratios and Sortino ratios that measure the
measure
the per
excess
of riskfunds
taken.
SRI equitythe
funds
excess return
eachreturn
unit of per
risk each
taken.unit
RI equity
outperformed
benchmark
outperformed
the
benchmark
Sharpe
ratios
63%
of
the
time,
and
Sortino
Sharpe ratios 63% of the time, and Sortino ratios (which measure excess return ratios
against
(which
measure
excess
downside
loss) 72%
of the return
time. against downside loss) 72% of the time.

We
findincome
that theand
SRI
fixed income
mutual
funds
in Canada
examined
RI fixed
balanced
mutual and
fundsbalanced
in Canada
examined
in this
study, financially
in
this study,
financially
outperform
their
respectiveoutperform
benchmarkstheir
67%respective
of the time.benchmarks 67% of the time.

Canadian fixed income RI funds and Canadian balanced RI funds are line with other
Canadian mutual funds in these asset classes with regard to common risk metric, standard
deviation.

Canadian fixed income RI funds and Canadian balanced RI funds show the ability of RI
funds to reduce downside risk, outperforming the benchmark Sortino ratio 61% of the time.
About The Carleton Centre for Community Innovation:
The Carleton Centre for Community Innovation (3ci) is a university research centre based at the School of Public Policy and Administration
at Carleton University, Ottawa, Canada. Through research, education and program management, 3ci investigates, strengthens and
disseminates innovation in community-based economic development, and local governance, responsible investment, philanthropic and non
profit leadership, social finance, and community/university engagement.
Acting as a catalyst and convener, and linking research to practice and policy, the Centre seeks to enhance understanding and knowledge
of the distinctive contributions of the non-profit, voluntary, and philanthropic sectors and local institutions to the quality of life of citizens and
community vitality on the part of geographic communities and communities of interest, in Canada and around the world.
About the author
Dr. Tessa Hebb is the Director of the Carleton Centre for Community Innovation at Carleton University. Her research focuses on Responsible
Investment and Impact Investing. She is a frequent speaker on responsible investment policies and issues and has published many books
and articles on those topics.
Dr. Hebb is a member of the steering committees of the UN-backed PRI Academic Network, the Heartland Network, Canadian Business
Ethics Research Network, the Responsible Investment Association and the Impact Investing Policy Collaborative. She received her Doctorate
from Oxford University.
About OceanRock
OceanRock Investments Inc. is one of Canada’s fastest-growing investment management organizations, managing over $1 billion on behalf
of Canadian investors. OceanRock offers a full range of managed portfolio solutions and individual funds to meet the needs of individual
and institutional investors. OceanRock is dedicated to offering disciplined, risk-controlled diversified investment solutions to Canadian
individual and institutional investors and has a core commitment to RI through its Meritas SRI Funds. OceanRock Investments Inc. is a wholly
owned subsidiary of Qtrade Financial Group.
Meritas SRI Funds
Suite 1920, One Bentall Centre
505 Burrard Street, PO Box 85
Vancouver, BC V7X 1M6
1.866.924.6767
www.oceanrock.ca
Data used in this study with permission from Morningstar Inc. ©2015 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained
herein (1) are used by permission of Morningstar; (2) include the proprietary information of Morningstar, its affiliates and/or their third party content providers, (3)
may not be copied or redistributed, (4) do not constitute investment advice offered by Morningstar, (5) are provided solely for informational purposes, and (6) are
not warranted to be timely, complete or accurate. Neither Morningstar, nor its affiliates nor their third party content providers shall be responsible for any trading
decisions, damages or other losses resulting from, or related to, this information, data, analyses, opinions or their use.
The information contained herein is provided by OceanRock Investments Inc. (“OceanRock”) for general informational purposes only and is not intended to provide,
and should not be relied upon as providing, legal, accounting, tax, financial, investment or other advice, or a solicitation to buy or sell any securities. Economic
and market conditions are subject to change. The information was obtained from sources believed to be reliable, but is not guaranteed to be accurate or complete.
OceanRock is not responsible for any errors or omissions. Meritas SRI Funds is a division of OceanRock, a wholly owned subsidiary of Qtrade Financial Group.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before
investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Publication date: June 2015