Ethical asset funds see highest drop in retail sales on record

Michael Bow
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ETHICAL investment funds saw the highest outflow of money on record last quarter amid slower retail fund sales, figures out yesterday reveal.

Ethical funds, which account for around 1.2 per cent of investment funds, saw a £33m outflow in net retail sales in the third quarter, according to statistics from the Investment Management Association (IMA), versus a £46m inflow of cash from investors at the same time last year.

The drop is the highest since 1992, when the IMA, the fund manager lobby group, started recording sales of ethical funds.

It is in keeping with a general outflow trend over the past year, with £9m of outflows on average for the previous three quarters.

Retail net sales have also slowed across other funds, with fund of funds down £151m versus the figure for last year, while tracker funds saw £323m less sales compared to a year ago.

Hargreaves Lansdown’s Mark Dampier said ethical funds did not perform as well against unconstrained funds. “The problem with ethical funds is you’re asking a fund manger to run a fund with one hand behind his back,” he said.

Figures show ethical funds, which refuse to invest in companies including tobacco or arms firms, can perform worse than traditional funds, with the first ethical fund established, the F&C Stewardship Growth fund, underperforming returns on the FTSE All Share by 490 percentage points over 25 years.