Almost one-in-five retail fund dollars in NZ fall under the responsible investment label as the sector continues to outpace growth in the wider market, according to new figures from Australian researcher, Plan for Life (PFL).
“Responsible Funds now comprise [A]$16.1bn of Funds Under Management, which is 18.1% of the total NZ Retail market and have defied fluctuating investment markets to post significant growth including a 29.7% 5 year CAGR [compound annual growth rate],” the PFL study says.
However, the NZ responsible investment (RI) fund growth-rate during the 12 months to the end of September last year of over 27.6 per cent was slightly off the five-year average and below the annual figures for the counterpart Australian market.
The PFL report says RI grew over 38 per cent in the Australian retail market during the 12-month period and almost 29 per cent among superannuation funds. RI-badged Australian exchange-traded funds (ETFs), meanwhile, jumped more than 130 per cent over the same period – albeit from a lower base.
As at September 30 last year the Australian ETF market reported RI-flavoured products to the tune of about A$5.7 billion compared to just under A$2.5 billion 12 months previously.
Solid growth across all Australasian fund sectors in the PFL survey pushed total RI assets under management above A$100 billion for the first time. Australian retail funds comprise close to 55 per cent of the trans-Tasman RI market followed by superannuation funds at a tad above 24 per cent.
Overall, RI funds under management was “up 37.2% over the past year driven by solid growth in investment markets and record Inflows”, the PFL report says.
“On average, annual growth in Responsible Funds has exceeded the wider market by 10.6% p.a. consistently over the past 3 years and total Responsible Funds have not experienced negative quarterly Net Flows over the past 6 years.”
The PFL study also notes RI global equity share funds outperformed vanilla rivals during the 12 months to September 30 after tracking close to the wider cohort over the last five years.
“Historically, similar outperformance is seen during periods of stagnant or negative growth in the wider market where responsible trusts tend to enjoy extended peaks and less dramatic falls,” the survey says.
Despite the nominal growth in the RI sector, Simon O’Connor, head of the Responsible Investment Association of Australasia (RIAA), says in a recent blog that “claims around sustainability and impact will be far more closely scrutinised” in the years ahead.
“Good responsible investors will differentiate themselves with the substance of what their approach to responsible investment means, but even more importantly, detailing the real-world outcomes they’ve helped to deliver,” O’Connor says.
RIAA has slated its annual NZ conference for May 17, returning live in-person to the Hilton Hotel in Auckland following two years of COVID-related digital-only performances.