Abstract
Measures favoring healthy lives among populations around the world are essential to reduce social inequalities. Mutual funds could play an important role funding these measures if they are able to attract socially concerned investors by improving their wealth. This study analyzes the financial performance of mutual funds focused on the biotechnology and healthcare sectors related to UN sustainable development goal 3 (SDG 3), comparing their risk-adjusted return with that achieved by conventional mutual funds. This study implements Carhart’s multifactor model and Bollen and Busse’s timing multifactor model on a sample of 34 biotechnology and 178 healthcare mutual funds and 4352 conventional mutual funds. The results show that biotechnology and healthcare mutual funds perform similarly, while both of them outperform conventional mutual funds. This outperformance of biotechnology and healthcare funds is driven by the superior stock-picking skills of their managers with regards to those of conventional fund managers, while managers of biotechnology, healthcare, and conventional mutual funds present similar poor market timing ability. Mutual funds specialized in biotechnology and healthcare sectors related to sustainable development goal 3 (SDG 3) outperform conventional mutual funds.
Highlights
The main aim of this study is to examine the financial performance of biotechnology and healthcare mutual funds, comparing it with that achieved by conventional mutual funds
While previous studies have focused on analyzing SDG funds related to the water sector [1], the renewable energy sector [2,3,4,5,6] or several thematic sectors as a group [7], limited attention has been paid to mutual funds focused on sustainable development goals in the area of health, the United Nations encourages the private sector to contribute to progress towards sustainable development goals by investing in firms related to healthcare issues
Mutual funds focused on the biotechnology and/or healthcare sectors could play an important role by providing financial capital to achieve the third sustainable development goal, given that they accumulate large amounts of money that are channeled towards firms developing innovative projects to find a cure or provide immunity for certain debilitating diseases such as HIV or malaria, to mitigate infant and maternal mortality, or to improve the quality of life for unhealthy persons, all of which form part of the third sustainable development goal
Summary
The main aim of this study is to examine the financial performance of biotechnology and healthcare mutual funds, comparing it with that achieved by conventional mutual funds. Mutual funds focused on the biotechnology and/or healthcare sectors could play an important role by providing financial capital to achieve the third sustainable development goal, given that they accumulate large amounts of money that are channeled towards firms developing innovative projects to find a cure or provide immunity for certain debilitating diseases such as HIV or malaria, to mitigate infant and maternal mortality, or to improve the quality of life for unhealthy persons, all of which form part of the third sustainable development goal. This investment strategy has grown considerably over the last five years and it could be mixed with other socially responsible investment (SRI) strategies such as best in class, stewardship and engagement, and impact investing as proposed by Eurosif [8]
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