Understanding the preferences of socially responsible investors. A study of the effects of financial performance and sustainability on mutual funds' flows.

Christian Fontano Vega & Jakub Gruszczynski

Student thesis: Master thesis


This thesis focuses on the behaviour of investors in socially responsible funds, as revealed by mutual fund flows. We analyse how this behaviour is affected by the funds’ performance and sustainability ratings. The sample used in this study consists of equity mutual funds based in the United States during the period from January 2015 to May 2020. We match comparable conventional and socially responsible funds and conduct a series of hypothesis tests.
This study finds that past annual returns affect fund flows differently depending on whether the fund is socially responsible or conventional. Furthermore, the flowperformance relationship is found to be weaker for socially responsible funds compared to conventional ones, in particular when returns are below-average. However, the sensitivity of fund flows to returns that are negative or in the bottom of the performance range is discovered to be not significantly different for socially responsible and conventional funds. Concerning the effect of sustainability ratings on fund flows, we find that it is not uniform across socially responsible and comparable conventional funds. Finally, the relationships we identified did not appear to be distorted by the coronavirus pandemic.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2021
Number of pages113