Do investment managers charge more costs for SRI funds? Evidence from the european financial market

Our aim is to provide evidence regarding cost differences comparing Socially Responsible Investing (SRI) to traditional funds, if any, and if those are influenced by the ethical rating of the fund. Our methodology is based on a multiple linear regression model in a matched-pair sample of 309 European SRI and non-SRI funds managed by the same managing company and a comprehensive sample of 558 European SRI funds. Our main findings are on size, country, asset class, and ethical rating effects. Contrary to our concerns, the asset management industry is not (yet) exploiting the retail investors’ utility function, which weighs the 'value' over the 'price' of SRI products. This evidence unveils a hidden reward: if investors actively select higher ethically rated SRI funds, he or she will benefit from a lower cost charged to these funds by a specialised asset manage