The Financial Performance of Solidarity Investment Funds: the French Case

Transcription

1 The Fnancal Performance of Soldarty Investment Funds: the French Case Yves Jégourel 1, LARE-ef Samuel Maveyraud 2, GREThA UNIVERSITE MONTESQUIEU BORDEAUX IV Avenue Léon Dugut, Pessac, France Abstract: Soldarty fnance covers the so-called 90/10 funds, where 10% of resources are nvested n government-recognzed soldarty companes, and revenue sharng funds, where holders accept that all or part of ther remuneraton s gven to an organzaton wth a socal or humantaran purpose. Stll a frnge element compared wth socally responsble nvestment funds but postng rapd growth n recent years, soldarty fnance has been gven scant consderaton by prevous academc papers. In ths study, we take a close look at the fnancal performance of soldarty mutual funds and OEICs and, wth the help of a Fama- Carhart-French (1997) mult-factor model takng nto account condtonal heteroscedastcty, have attempted to ascertan whether these funds under- or outperform conventonal SRI funds. We show that there s no compellng econometrc evdence pontng to the under-performance of soldarty funds. Code JEL: G11, G15 I. Introducton Whle soldarty fnance s stll a frnge component n the world of collectve fund management, t has, over the past several years, acheved consderable success n partcular wth ndvdual savers. Sums outstandng wth soldarty savngs have been constantly rsng and n 2007 topped bllon, growth of over 30% n one year. Although forms of rasng funds are stll vared (savngs books, unlsted shares ), the lon s share of ths type of savng s concentrated wth UCITS (undertakngs for collectve nvestment n transferables), whether ndvdual or payroll-related. As at December 31, 2007, outstandng sums wth general purpose UCITS and open-end nvestment companes (OEIC) were respectvely 643 and 598 mllon, versus 445 mllon for bank savngs accounts, tme depost accounts and 1 yves.jegourel@u-bordeaux4.fr, Research fellow at Bordeaux Management School. 2 samuel.maveyraud@u-bordeaux4.fr 1

2 unlsted shares 3. Dfferent to so-called ethcal (or socally responsble) fnance, whch ams to ntroduce extra-fnancal crtera nto the nvestment strategy of fund managers, soldarty fnance has the purpose of partcpatng drectly or ndrectly n the fnancng of a socal acton. No emprcal study of soldarty nvestment funds seems to have been conducted, partcularly n terms of ther fnancal performance. Whle the relatve confdentalty of these funds explans n part ths state of affars, the assumpton whereby such studes would n any case hardly be meanngful gven that such nvestment funds do not set out to offer real fnancal performance, cannot be totally dscarded. Yet soldarty and fnancal performance can hardly be consdered as antthetcal wthn soldarty fnance, whatever the type of fund under consderaton. Subscrbers to revenue sharng funds show less nterest n fnancal performance only on an ndvdual bass because they do not receve all the ncome related to holdng ths type of asset. Collectvely, however, the fund s fnancal performance wll be key as t wll determne the amount of revenue dstrbuted to benefcary assocatons. The fnancal dsnterest of the holder of revenue sharng funds s furthermore merely relatve, as he or she benefts from a potental gan from the resale of shares 4. In the case of 90/10 funds, savers are fully lookng for fnancal performance nasmuch as ther socal nvolvement stems from the fnancng of soldarty companes ntended to produce profts. Ther form of allocaton may, partcularly n the case of a cooperatve, restrct return potental on the 10% nvested but not on the remanng 90% 5. From ths, analyss of the fnancal performance of soldarty funds would appear legtmate n order to ascertan whether the ncluson of crtera of soldarty s a factor of under-performance or over-performance for both revenue sharng funds and for 90/10 funds. 3 Source: Fnansol. 4 Ths may nonetheless by reduced through a donaton for socal msson organzatons. 5 Cooperatves are effectvely subjected to three tght legal constrants: (1) 51% of company shares must be held by employees; (2) the value of the company s shares remans frozen, meanng that no captal gan may be made; (3) the splt of profts s subjected to a specfc control system. 2

3 To conduct ths analyss, we wll proceed wth the estmaton of a Fama-French- Carhart [1997] type mult-factor model, takng account of condtonal heteroscedastcty, a tradtonal characterstc of fnancal tme seres. More precsely we wll use E-GARCH modellng n order to take on board the asymmetres of the volatlty of excess return. In the frst secton we gve a detaled run-down of the realty of the French market for soldarty UCITS, then secondly we present a revew of lterature on the measurement of the performance of so-called ethcal funds. Ths s useful to get a better understandng of the lnk that may exst between socal or envronmental captal gan and the fnancal performance of an nvestment fund. The data and methodology adopted n ths study to measure the fnancal performance of soldarty funds s gven n detal n a thrd secton. Fnally we present and analyse our fndngs. II. The French market for soldarty nvestment funds Wth sums outstandng of 200 mllon n 2002 versus 1.6 bllon n 2007, the expanson of the soldarty savngs movement n France s consderable. Whle the Act rulng on employee savng schemes has fostered ths growth, there s no denyng that the soldarty mechansms offered by these savngs products, and ther returns, meet the ambtons of nvestors: 38% of the French populaton feel that they mght nvest n ths type of product on the condton that returns are the same as those from a tradtonal nvestment, whle 19% are ready to accept a lower return 6. There are two types of soldarty fund n France, geared to the nature of the soldarty mechansms mplemented. The so-called 90/10 funds, thus labelled owng to the form of resource allocaton; 10% of nvested sums s placed wth companes recognzed as, or smlar 6 Accordng to an Ipsos/Fnansol poll presented n the soldarty fnance ndcator

4 to, soldarty concerns 7, whle the remanng 90% s nvested n tradtonal companes, respectng n prncple the socal, envronmental and good governance crtera (known as ESG crtera) pecular to ethcal fnance 8. Revenue-sharng funds, for ther part, are not necessarly desgned to be nvested n soldarty companes, but they offer redstrbuton mechansms n favour of nsttutons wth a socal or humantaran callng. These redstrbuton mechansms come from ether the management company, whch retrocedes a share of any custodal, entry or ext costs leved on savers, or the saver hm/herself, who pays a fracton (25 to 75%) of the dstrbutable revenue from UCITS 9 stock n the form of donatons. The remanng fracton s captalzed. Out of the 1.5 bllon nvested n soldarty savngs products n , 133 mllon were allocated to soldarty actvtes. Today 11 there are 26 soldarty UCITS (or UCITS compartments) n France recognzed as such by Fnansol, the assocaton charged wth promotng soldarty fnancng and labellng savngs products 12. The soldarty actvtes fnanced by these funds are manfold, rangng from nternatonal soldarty actvtes (far tradng, mcrocredt) to ntegraton actvtes that nclude economc actvty and housng. Whle eght funds have the msson of capturng employee savngs schemes, a very large majorty are stll accessble to ndvdual nvestors. 7 Consdered as soldarty companes are companes whose captal stock, f any, s not open to negotatons n a regulated market and onethrd of whose employees have been recruted n the framework of ntegraton contracts of employment, or whch are ncorporated n the form of assocatons, cooperatves, frendly socetes, welfare nsurance nsttutons or companes whose managers are elected drectly or ndrectly by employees, members or stakeholders, provdng that all sums receved from the company do not exceed a certan threshold. Assumed equvalent to these companes are organzatons at least 40% of whose assets are composed of stock ssued by soldarty companes or credt nsttutons, and where 80% of all loans and nvestments are made n favour of soldarty companes. 8 By vrtue of the act relatve to employee savng schemes, the assets of these soldarty funds are composed: a) for one part, of between 5 and 10%, of securtes ssued by regstered soldarty companes pursuant to artcle L of the labour code or by venture captal companes referred to under artcle 1-1 of act N of July 11, 1985 comprsng varous provsons of an economc and fnancal order, or by venture nvestment mutual funds referred to under artcle L , subject to at least 40% of ther assets consstng of stock ssued by soldarty companes mentoned under artcle L of the labour code; b) for the remander, of marketable securtes open to negotatons on a regulated market and, accessorly, of lqudtes. 9 Two mechansms are once more possble; the share of returns for the beneft of assocatons wth a socal purpose may be geared to ether the dvdend or the latent captal gan wth UCITS shares or securtes defned as the dfference between the ntal market value and the endof-perod market value. 10 To whch should be added the 187 mllon nvested drectly wth soldarty fnancers. 11 As at July 22, Other soldarty funds exst but have been created only recently, have not yet been labelled as such by Fnansol and so are not ncluded n ths study. 12 It should be ponted out that the exstence of nurses, funds of funds or compartmented funds make t more dffcult to evaluate wth any real precson the exact number of soldarty funds. 4

5 Table 1: General purpose UCITS labelled n France Name of UCITS Date of creaton Form Bank Invest. Type Habtat et humansme 1991 OEIC LCL dversfed Shared Rev. Inserton emplos 1994 OEIC Natxs shares 90/10 Inserton emplos equlbre 2006 OEIC Natxs shares 90/10 Fam et développement horzon 2000 OEIC Crédt coop. bonds Shared Rev. Fam et développement equl OEIC Crédt coop dversfed Shared Rev. Fam et développement tréso OEIC Crédt coop bonds/tcn Shared Rev. France emplo 1994 OEIC Crédt mut. monetary Shared Rev. Nord-Sud Développement 1984 CEIC Natxs bonds 90/10 Chox soldare 2000 CEIC Crédt coop dversfed Shared Rev. Natxs soldare 2006 VOEIC Natxs unlsted - Ethque et partage 2000 OEIC Meeschaert shares Shared Rev. Pacte vert Ters Monde 1987 OEIC Crédt agr. bonds/tcn Shared Rev. Crossance durable et soldare 2002 OEIC Macf shares 90/10 Crédt muncpal soldare 2004 OEIC Dexa dversfed 90/10 Pacte soldarté logement 1997 OEIC Crédt agr. bonds/tcn Shared Rev. Epargne soldare 1987 OEIC Crédt coop bonds/tcn Shared Rev. Eurco soldarté 1992 CEIC LCL bonds Shared Rev. Lberté et soldarté 2001 CEIC LBP dversfed Shared Rev. Source: Fnansol, AMF (Fnance Market Authorty) (base GECO) Lke tradtonal UCITS, a sgnfcant proporton (70%) of soldarty nvestment funds are general purpose open-end nvestment companes (OEIC) nvested n shares, fxed-rate nstruments (bonds or negotable credt nstruments) or n a dversfed manner accordng to the classfcaton adopted by the AMF (Fnance Market Authorty). Offerng the tradtonal C shares (revenue captalzaton) and/or D shares (dstrbuton), shared revenue funds have n some cases the pecularty of specfc shares lnked to the dentty of the benefcary organzaton 13. Some funds are, n the same way, nurses or compartmented funds. Structured as a venture OEIC (VOEIC), only one soldarty fund n France today nvests n unlsted securtes. The net assets of soldarty funds reveal partcularly dsparate sums, rangng from 3 mllon to over 180 mllon As an example, the Chox Soldare CEIC dsposes of four types of specfc shares, besdes shares C and D: the AU share (Agr-Uncef), the FCS share (Fruct Chox Soldare), the FAU share (Fruct-Agr-Uncef) dstrbuted wthn the Crédt Coopératf network, and the FRM share (Fondaton pour la recherche médcale). 14 As at July 22,

6 Table 2: How shared revenue funds functon Name of UCITS N of compartments/type of % of dstrbuted shares revenue Habtat et humansme 1 25% Fam et développement 3 50 or 75% France emplo 1 50% Chox soldare 6 0 to 50% Ethque et partage 1 100% Pacte vert Ters Monde 1 50% Pacte soldarté logement 1 50% Epargne soldare 1 50% Eurco soldarté 1 50% Lberté et soldarté 1 50% Source: AMF (Fnance Market Authorty) (base GECO) III. Fnancal performance or soldarty commtment? There are no theoretcal or emprcal studes of soldarty fnance or, more partcularly, of ther relatve fnancal performance. Yet fnancal performance and socal or envronmental gan are not antthetcal; a study conducted by Derwall et al. (2004) partcularly evdences the fact that the performance of a corporate portfolo wth hgh envronmental standards could be sgnfcantly hgher than that of a corporate portfolo that neglects these same standards. Furthermore, the assumpton whereby certan nvestors mght have a mult-attrbute utlty functon, based certanly on the optmzaton of the return-rsk gearng of ther portfolo but also on the socetal feedback of ther nvestment strategy, cannot be excluded (Bollen (2007). A szeable number of research artcles have endeavoured to measure the performance of ethcal or socally responsble funds (SRI) to determne whether the ntegraton of extrafnancal crtera, both postve (best-n-class approach) and negatve (excluson crtera), nto the allocaton strategy of funds, s a factor of over-performance or under-performance compared wth nvestment funds that adopt purely fnancal crtera. In ths sense there are two opposng assumptons (Renneboog et al. (2008a)): by ntroducng addtonal crtera for the selecton of securtes, partcularly excluson crtera, SRI funds are, on the face of t, workng wth a more restrcted sphere of nvestment than tradtonal nvestment funds. Faced wth lower potental for dversfcaton, these funds are thus supposed to offer lower fnancal 6

7 performances. The second hypothess suggests nversely that n takng on board extrafnancal crtera, fund managers are able to dentfy companes operatng wth a hgh level of socal and envronmental responsblty, tself a source of creaton of value. A number of studes thus hghlght the fact that f ethcal funds tend to under-perform wth ther reference portfolos, ther rsk-adjusted returns are by contrast not sgnfcantly dfferent to those from tradtonal funds (Bauer et al. (2005), Renneboog (2008b)). 15 A smlar analyss may be made for soldarty funds n order to better understand the motvatons of holders of shares: are ther fnancal performances n partcular sgnfcantly lower than those from conventonal nvestment funds, thus markng the arbtrage of nvestors n favour of socal gan? IV. Data and Methodology Based on all the funds labelled by Fnansol, we have formed two portfolos of soldarty funds under French law, one assemblng shared revenue funds, the other 90/10 funds and both belongng to the AMF classfcaton of shares and dversfed. 16 Only dstrbuton or mxed combnng captalzaton and dstrbuton shares have been consdered to avod any bas n the analyss of performance. A total of nne funds have thus been taken nto account and studed usng weekly data for the perod from January 1999 to July To measure fnancal performance relatve to soldarty funds, we have consdered, over ths same perod, an equally-weghted reference portfolo composed of 14 French-law SRI funds 17 the sze and age characterstcs of whch are smlar to those of the soldarty funds. We have proceeded n two stages to buld the reference portfolo: frst of all, for each soldarty fund, we have selected the 6 SRI funds whose date of creaton s closest to that of the soldarty fund. Once these funds were selected, we chose the 3 SRI funds whose net 15 For a complete revew of lterature on the fnancal performance of ethcal funds, see Renneboog et al (2008b), partcularly the tables pp By contrast, wth dversfed UCITS no dstncton s made between share-domnant and bond-domnant funds. 17 Here we have adopted the methodology used by Renneboog et al (2008a). The selected SRI funds are funds whose ttle ncludes the words sustanable or ethcal. 7

8 assets as at July 22, 2008, were the closest to that of the soldarty fund. In all, the reference portfolo assocated wth the shared revenue fund s composed of 15 (5 x 3) SRI funds, whle the reference portfolo relatve to 90/10 funds comprses 12 SRI funds. Addtonally we have consdered two market ndces n the framework of ths analyss: the Morgan Stanley Captal Internatonal, France (MSCI France), representatve of developments n the share market n France, and the Advanced Sustanable Performance Index, Eurozone (ASPI Eurozone), representatve of the evoluton of socally responsble companes wthn the euro zone 18. Lastly, the rsk-free rate consdered s the Eurbor 3 month rate. To date, two methods have been used to analyse the performance of SRI funds: CAPM (Captal Asset Prcng Model) and mult-factor models wth whch to measure the relatve performance of these funds, and flow models wth whch to test the reacton of subscrbers 19 to varatons n the performance of funds. Gven the ssue consdered n ths artcle, we have adopted the frst method. Orgnally based on CAPM type models, the analyss of the fnancal performance of mutual funds was gradually extended to Fama-French-Carhart [1997] type mult-factor models on account of the many bases exstng n an econometrc analyss that does not take account of the nvestment strateges of fund managers. In conformty wth exstng work on ethcal fnance, we have thus estmated the followng relaton for the shared revenue portfolo, the 90/10 fund portfolo and the reference SRI portfolo: R = α + β + 2 ( h ) * 1, R + β 2, SMB + β3, HML + β 4, UMD ε ε ~ 0, t where R, defned by R ( r r ) = represents the excess return of the consdered portfolo f ( r ) n relaton to the rsk-free rate ( r f ). * R, represents the excess return of the market portfolo ( r * ) n relaton to the rsk-free rate ( r f ). The SMB factor ( small mnus bg ) 18 To our knowledge, no French ndex for ethcal values s currently avalable. 19 In terms of varatons n the mutual fund s net assets. 8

9 captures the bas lnked to the excess returns of small companes n relaton to large companes, whle the HML factor ( Hgh mnus Low ) helps account for excess return from growth companes over mature companes. Lastly, the UMD factor ( Up mnus Down) ams to account for momentum strateges. As opposed to emprcal studes of the performance of SRI funds that suppose the normalty of resduals, we have consdered the hypothess of condtonal heteroscedastcty of resduals, tradtonally adopted n the analyss of fnancal tme seres. 20 Thus, to take account of ths property, we have ntroduced EGARCH(1,1) type modellng such as: avec h t = a 0 + a 1 e, t e I t 1, t 1 h, t 1 ~ N + b ( 0, h ) 1 log t ( h ), t 1 + c 1 e, t 1 h, t 1 In the followng secton, we have mplemented ths modellng consderng that r s the return from the soldarty fund portfolo and * r the return from the MSCO France or ASPI Eurozone portfolo, and have thus measured the relatve performance (n terms of alphas) of soldarty funds. V. Results and Interpretatons We have addressed the analyss of tme seres by studyng ther statonary value. To do ths we have adopted the ADF and DF-GLS tests. In each case, the optmal number of lags s ascertaned along the Akake nformaton crteron. Table 3 evdences the fact that seres under study are all statonary level-wse n a model wth an ntercept wth no determnst trend. 20 We wll test the valdty of such an assumpton n the next secton. 9

10 Table 3: Unt root tests (wth ntercept but wth no determnst trend) Varables ADF DF-GLS Ret. Sh-Rev. Conv. Port *** *** Ret. 90/10 Conv. Port *** *** Ret. 90/10 Port *** -6.06*** Ret. Sh. Rev. Port *** *** Ret. MSCI *** *** Ret. ASPI *** *** HML -8.04*** -2.80*** SMB *** -2.38** UMD 4.19*** -2.84*** Note: ***, **, * denote respectvely a rejecton of the null hypothess at rsk levels of 1%, 5% and 10%. Ret. 90/10 Port. s return from 90/10 portfolo, Ret. Sh. Rev. Port. s return from the shared-revenue fund portfolo. Ret. Sh. Rev. Conv. Port. s return from the conventonal portfolo assocated wth shared revenue funds. Ret. 90/10 Conv. Port. s return from the conventonal portfolo founded usng sze and date characterstcs of 90/10 soldarty funds. Ret. MSCI and ret. ASPI are returns from the reference portfolos. Fnally, HML, SMB and UMD are the three varables calculated usng the work of Fama & French (1993) & Carhart (1997). Note that the returns consdered n ths study are gross returns where the dstrbuton of dvdends s not consdered. A study of the statstcal propertes of portfolo gross returns hghlghts the absence of any normalty of return seres wth regards SK and EK values and the Jarque-Bera test (table 4). Table 4: descrptve statstcs of gross returns Portfolo Number of funds Av. S.D. SK EK JB stat Max Mn Qstat(5) ARCH(5) 90/10 Funds * * Conventonal funds (90/10) * * Shared revenue funds * * Conventonal funds (shared * * revenue) Note: SK s the skewness coeffcent. EK s the Kurtoss excess. JB stat s the Jarque-Bera statstc. Max s the hghest return. Mn s the lowest return. Qstat(5) s the Ljung-Box statstc, calculated wth 5 lags. ARCH(5 ) s an ARCH test conducted wth 5 lags, on the resduals of an autoregressve model of gross returns (AR( 5)). * Denotes rejecton of the null hypothess at a rsk level of 5%. The Ljung-Box statstcs (Qstat(5)) suggest no autocorrelaton n returns whle the ARCH test evdences condtonal heteroscedastcty, justfyng our econometrc model. To choose the most approprate type of GARCH model, we have tested for asymmetry n condtonal volatlty. More precsely, we have appled the so-called Engle-Ng tests (1993) to reveal any bas n sgn or sze. Sgn bas denotes that a negatve shock (or news) wll not have the same mpact on condtonal volatlty as a postve shock. Sze bas means that the extent 10

11 of shocks may dffer dependng on whether postve or negatve. These tests appled to our portfolos reveal a sze bas and thus justfy the use of an EGARCH(1,1) model, where the volatlty of resduals s asymmetrcal. In table 5, we have studed for each soldarty, shared revenue or 90/10 portfolo the excess return related to the rsk-free rate compared wth the excess return from the two reference portfolos (benchmarks),.e. one composed of MSCI France ndex shares and the other whose shares form the ASPI Eurozone ndex. In the same way as wth soldarty portfolos, we have consdered for each soldarty portfolo and each benchmark the excess return from the conventonal portfolo. Lastly, we have analysed under the headng dfference portfolo the performance of the soldarty portfolo corrected wth the conventonal portfolo performance, n relaton to excess returns from the reference portfolos at the rsk-free rate. Table 5: the relatve performance of soldarty funds Type of portfolo Benchmark Α β 1 β 2 (HML) β 3 (SMB) β 4 (UMD) Shared revenue MSCI France -3.65E *** (-0.01) (27.14) (1.34) (1.17) (-1.61) Conventonal *** (0.60) (53.80) (0.38) (-0.88) (-0.55) Dfference *** (-1.20) (-45.58) (0.15) (0.60) (0.33) Shared revenue ASPI Eurozone *** (-0.14) (27.39) (1.15) (0.79) (-1.24) Conventonal *** (0.18) (53.20) (1.22) (-1.29) (-0.28) Dfference *** (-0.65) (-42.95) (-1.40) (0.84) (0.08) 90/10 MSCI_France *** (-1.24) (22.95) (0.69) (-0.63) (0.78) Conventonal *** (-0.24) (43.63) (0.22) (-0.67) (0.34) Dfference -0.20*** -0.20*** 0.07* -0.11*** 0.03*** (-2.88) (-13.56) (1.89) (-2.66) (2.34) 90/10 ASPI Eurozone -0.24* 0.53*** (-1.72) (24.00) (-0.27) (0.15) (1.18) Conventonal *** * 0.00 (-0.15) (39.07) (1.20) (-1.88) (0.05) Dfference -0.22*** -0.18*** 0.09*** -0.10*** 0.03*** (-3.92) (-11.90) (2.99) (-2.95) (3.11) Note: ***, **, * denote respectvely rejecton of the null hypothess at rsk levels of 1%, 5% and 10%. 11

12 The results show that the performance of soldarty funds s not sgnfcantly dfferent to the performance of the MSCI market portfolo. Whether wth the shared revenue portfolo or the 90/10 portfolo, the alphas are not sgnfcantly dfferent to zero. As a result, soldarty funds do not under-perform wth regards a portfolo of French stock. Our results also show that conventonal socally responsble nvestment funds yeld performance that s equvalent to that of soldarty funds. Ths observaton s gven added weght by the dfference portfolo for shared revenue funds: the value taken by α, not sgnfcantly dfferent to zero, suggests excess return from the shared revenue fund portfolo n relaton to the correspondng SRI portfolo, comparable to the excess return from the MSCI portfolo n relaton to the rsk-free rate. By contrast, the dfference portfolo assocated wth 90/10 funds seems to perform less well than the excess return from the MSCI portfolo. There are lkely to be two explanatons for ths result. Frstly, we can hghlght the fact that the degree of soldarty s drectly proportonal to performance for shared revenue funds, whereas ths holds lttle sway wth 90/10 funds. Indeed, the soldarty objectve s relatvely ndependent from fund performance nasmuch as 10% s mmedately nvested wth companes recognzed as soldarty concerns or smlar thereto; n the case of C shares, where dvdends are captalzed, t s dependent upon fund performance nasmuch as a porton of returns obtaned s renvested n soldarty companes. By contrast, shared revenue funds need to produce the hghest performance n order to optmze soldarty because only a part of dvdends (and possbly a fracton of admnstratve costs) s pad to soldarty nsttutons: to be attractve to savers whose am s to nvest n soldarty schemes, these funds must produce the hghest possble performances. A second explanaton les wth the weaker performance of the soldarty component of 90/10 funds compared wth the tradtonal component. To the extent that soldarty companes are not ntended to produce hgh returns on captal, return from the assets assocated wth these companes may, on average, be lower than that 12

13 prevalng n tradtonal busness companes, most notably n cases of cooperatve type soldarty companes n whch remuneraton from the captal share s by nature lower than that from the labour share. Compared wth the relatve performances of the ASPI Eurozone portfolo, our fndngs hghlght the fact that shared revenue funds provde more or less equvalent returns. By contrast, the 90/10 fund portfolo performs less well than the ASPI Eurozone portfolo at the threshold of 10%. Ths result s confrmed by the value of the coeffcent wth the assocated dfference portfolo. Rsk analyss clearly evdences the fact that the latter s lower wth soldarty portfolos than wth market portfolos. In every case, the β 1 coeffcent s below 1. Furthermore, the HML, SMB and UMD factors emerge as beng of lttle sgnfcance except when studyng the dfference portfolo assocated wth the 90/10 portfolo. On the whole, our results show that the performance of soldarty funds s senstve to the type of fund under consderaton: shared revenue funds produce relatvely dentcal performance to that seen wth tradtonal and SRI funds, whle 90/10 funds appear to record relatve performances that are slghtly lower. VI. Concluson In an orgnal way ths artcle casts lght on a lttle-known aspect of ntermedated fnance: n measurng the performance of French-law share- and dversfed-type UCITS wth a soldarty functon, we have shown that soldarty and fnancal performance are not necessarly antthetcal. Whle soldarty UCITS offer fnancal performance that s lower than market ndces, there s no econometrc evdence of these soldarty funds underperformng, partcularly wth shared revenue funds, compared wth tradtonal ethcal funds. Whle the holders of shared revenue fund ttles accept a lower rate of return ndvdually, the managers of these funds can hope for the same performance objectves as conventonal fund managers. In a context of relatve suspcon lnked to the ongong fnancal crss, these 13

14 nvestment products, combnng fnancal performance, soldarty mechansms and, n the case of 90/10 funds, respect for socal and envronmental crtera, could be a lever n any bd to wn back savers. Focusng on share-based and dversfed UCITS, ths study offers only a part-vson of the soldarty fund market. It would be useful to extend our analyss to monetary- and bondtype soldarty funds wth modellng along the lnes of Ferson and Schadt (1996) n order to reach a global concluson over the lnk that exsts between soldarty and return. Furthermore t would be of nterest to draw up an nternatonally-scaled comparson of the performance of soldarty funds, but the regulatory specfcs of ths type of UCITS make such an analyss dffcult to mplement. Lastly, we feel t would be relevant to extend the study by Benson & Humphrey (2008) n order to get a clearer understandng of the lnk between flows (measured by the varaton n sums outstandng) and soldarty UCITS and ther returns. We could then consder measurng the senstvty of subscrbers holdng shares n soldarty funds to varatons n the remuneraton of ther nvestments. 14

15 VII. Bblography [1] Bauer, R., Koedjkb, K., Otten, R., Internatonal evdence on ethcal mutual fund performance and nvestment style. Journal of Bankng and Fnance 29, [2] Benson, K., Humphrey, J., Socally responsble nvestment funds: nvestor reacton to current and past returns. Journal of Bankng and Fnance 32, [3] Bollen, N., Mutual fund attrbutes and nvestor behavor. Journal of Fnancal and Quanttatve Analyss 42, [4] Carhart, M On persstence n mutual fund performance. Journal of Fnance 52, [5] Derwall, J., Gunster, N., Bauer, R., Koedjk, K., The eco-effcency premum puzzle. Fnancal Analyst Journal 61, [6] Engle, R., Ng, V., Measurng and testng the mpact of news on volatlty. Journal of Fnance 48, [7] Fama, E. F., French, K. R., Common rsk factors n the returns on stocks and bonds. Journal of Fnancal Economcs 33, [8] Ferson, E., Schadt, R., Measurng Fund Strategy and Performance n Changng Economc Condtons. The Journal of Fnance 51, [9] Fnansol, The soldarty fnance ndcator. [10] Ramchand, L., Susmel R., Varances and co-varances of nternatonal captal asset prcng model revsted. Journal of Internatonal Fnancal Markets 8, [11] Renneboog L, Ter Horst J., Zhang C., 2008a. The prce of ethcs and stakeholder governance: the performance of socally responsble mutual funds. Journal of Corporate Fnance 14, [12] Renneboog L, Ter Horst J., Zhang C., 2008b. Socally responsble nvestments: Insttutonal aspects, performance, and nvestor behavour. Journal of Bankng and Fnance 32,