Does Managing a SRI Fund Cost More? Evidence from the European Financial Market

Abstract

Our aim is to provide evidence regarding managing costs differences comparing Socially Responsible Investing (SRI) funds with traditional ones, if any, and if these are influenced by the ethical rating of the fund. The methodology is based on a multiple linear regression model in a matched-pair sample of 309 European SRI and non-SRI funds managed by the same managing company and a comprehensive sample of 558 European SRI funds. Our main findings are on size, country, asset class, and ethical rating. Yet, the higher the ethical rating, the lower the TER, especially at the highest level of rating. If investors actively select higher ethically rated SRI funds, he or she will benefit from a lower cost charged by specialized asset managers. In investing in 'good', choose the best!