SRI indices underperformed in market turmoil
AUSTRIA/GLOBAL - SRI indices have underperformed their peers during recent market turbulence but Martin Cech, portfolio manager at Austrian SRI asset manager Vinis argues this is only a glitch in the responsible investment success story.
The Austrian SRI index VÖNIX has outperformed its benchmark the ATX Prime by over 20% since its launch three years ago.
However, the last month saw a drop in the index' performance which returned 0.7% less than the ATX Prime in May.
Cech explains this development was caused by the major 18.7% outperformance of the Austrian oil refinery OMV over the last month.
"This company has a much higher weight in the ATX than it does in the VÖNIX," said the manager who helped the VBV Pensionskasse set up the SRI index in 2005.
"In general, small and mid-cap companies which have a higher weight in SRI indices show a higher volatility as their size makes them more vulnerable in turbulent market conditions than large caps," continued Cech.
He added many of the companies focussing on climate change, environmental protection and similar SRI themes which have a high weight in international SRI indices are often mid-cap stocks.
Confirming this trend, the FTSE 4 Good Global Index returned 0% and the Dow Jones Sustainability World TR 1.1% in May while the MSCI World Total Return delivered 1.2%.
"The volatility of small and mid-caps is higher but the long-term outperformance of the SRI approach is still certain," Cech is convinced.
"Overall, we do not see a trend of investors to go more into large-caps."
Vinis has now also become the first fund manager to launch an SRI Central and Eastern Europe fund.
"Many say SRI and CEE do not go together but we saw demand from investors in the region," Cech noted.
He added to begin with the fund includes CEE companies and Austrian companies with a strong presence in the area.
However, over the next few months the fund will be rebalanced to get a pure exposure to CEE companies.
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