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About 3d investing
Why 3D
Investing
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What Is 3D
Investing
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Performance
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Choosing 3D
Funds
A long enduring myth of investing for
a social as well as a financial return, is that financial returns
are compromised. How true is this?
Well, it depends on what we mean by 'performance'. Is it risk
adjusted, relative to similar investments or actual pounds and
pence?
Risk
Firstly, the prime concern of many investors is not to
lose money. There is no evidence that adopting non-financial
criteria is inherently more risky, although it is true that many
funds applying such criteria have a bias toward smaller companies
which are more volatile than their larger counterparts. Furthermore,
funds that apply exclusion criteria may rule out parts of the market
and may therefore be unable to invest in these areas when they would
otherwise do so.
However, as with all investment decisions, the key factor is one of
asset allocation – that is, how you divide a portfolio between
different sorts of investment. That is by far the biggest
determinant of investment risk and performance and non-financial
values can be incorporated in to the principal forms of investment
to achieve an appropriate balance of investments which adequately
manages investment risk.
Download
'The Importance of Asset Allocation'
(courtesy of Seven
Investment Management)
Relative Performance
“Ethical investments don't perform” is the old chestnut
of 3D investing, but how true is it?
The evidence is that applying
non-financial criteria doesn't necessarily impact on investment
performance when compared with conventional funds.
Rather the evidence is that some 'ethical' funds outperform and some
under-perform. Choice of type of asset and fund are clearly more
important than the ethical screen itself.
Absolute Return
In any case, the primary concern of many investors is simply to
generate a return in excess of inflation without taking on too much
risk. Applying non-financial criteria is less important in this
respect than asset allocation (link to asset allocation pdf as
above). The evidence is that ethical funds do not necessarily
perform any worse, but many are equity based and will broadly
reflect the underlying stockmarkets in which they are invested.
If you are primarily concerned with beating inflation or another
fixed benchmark, you should diversify your investments
appropriately.
Download UK Investment Fund Performance Data
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