Ethical funds show rivals a clean pair of heels

Ethical investment funds are beating their mainstream rivals hands-down, a survey from financial information group Moneyfacts suggests.

Over the past year the average UK ethical fund has grown by 18.3 per cent, against 13.7 per cent returned by non-ethical funds. Over three years, the figures are 57.2 and 52.4 per cent respectively.

The appeal of ethical funds to those with a social conscience is that they often ignore firms dealing in arms, tobacco, petrochemicals and even alcohol. But until recently they have had a reputation for underperforming other funds and for being relatively expensive to invest in.

According to Moneyfacts, however, a host of ethical funds are changing that perception. F&C Stewardship, Jupiter Ecology, Henderson Global Care and Aegon Ethical Equity were named as star performers over the past 12 months.

"The strong investment returns in recent years have helped shatter the misguided belief that ethical investments will always underperform traditional investment funds," said Richard Eagling at Moneyfacts.

"Instead, they have outperformed both their non-ethical rivals and the FTSE 100 over the last three years."

But over the longer term, often a truer test of performance, it seems they still have ground to make up.

Since 2002, the average UK ethical fund has grown by 66 per cent - 1 per cent shy of the performance put in by their mainstream competitors. What's more, since 1997, non-ethical funds have grown by an average of 103.5 per cent, against the 98.8 per cent recorded by ethical funds.

According to Ethical Investment Research Services, more than 6.1bn is invested in ethical funds and accounts in the UK.

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