The Ethical and Non Ethical Mutual Funds Comparison

Abstract

Problem statement: One of the astonishing new developments in the fin ancial community is the rise of ethical investments during the last decade. Particularly, the recent financial crisis h as determined a major attention towards an ethically o riented finance based on social investments and environmental benefits that can create greater corp orate crisis prevention. Because of the sheer size and importance of the ethical mutual funds, we thought to compare the ethical and non ethical mutual funds. Approach: The aim of this study was to describe the ethical and non ethical mutual under Italian and foreign law highlighting how some facto rs, such as typology (equity, balanced, fixed income), geographic location, management fees, characterize these in different way. Results: The analysis has been carried out collecting a dat a set of 219 mutual published on www.morningstar.com. The data set is subdivided in 109 ethical mutual and 110 non ethical mutual funds. The study uses a multi-disciplinary a pproach and it is led by a Multiple Correspondence Analysis (MCA) which puts in evidence the principal characteristics of the mutual by their projection on a factorial plane. Later the multivar iate analysis carries out typologies of mutual fund s clusters with particular characteristics by a Clust er Analysis. The study confirmed the existence of different characteristics with reference to the eth ical and non ethical mutual funds. Particularly, it puts in evidence three groups of which are inside homogeneous but heterogeneous between them by the characteristics considered. The first groups, d efined negative ethical performance, is composed of 152 funds. The second groups, named positive non ethical performance, is characterized by non ethical fund (50.23% of them is present in this gro up). The third cluster is called young funds and it is composed of born in the period 2005-2008. Conclusion: Finally, the results indicated that the ethical are different from the non ethical fu nds with regards to the performance and put in evidence that the ethical governed the financ ial crisis triggered by subprime in a better way th an the non ethical funds. Consequently we argue that i t is important that the interests of the financial community are addressed to the development and promotion of ethically oriented finance and of its instruments.