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As I continue to better understand the investment world, I've found out about the concept of Social Responsible Investments (SRI). From the prospectus of iShares MSCI USA SRI UCITS ETF:
> Firstly, companies are excluded if they are identified by the index provider, MSCI, to have any tie to controversialweapons, to be manufacturers of nuclear weapons or related equipment or providers of services auxiliary to nuclearweapons, or to be producers of civilian firearms or tobacco. Companies which are identified by MSCI as engagingin the following activities are excluded if their revenues from such activities (or related activities) exceed thebusiness involvement thresholds set by MSCI for: alcohol, gambling, tobacco, or civilian firearm distribution,nuclear power, adult entertainment, conventional weapons, genetically modified organisms, thermal coal, oil sands,unconventional oil and gas extraction and fossil fuel reserves ownership.
And then, the index keeps only the top 25% of companies that meet the criteria ("best in class").
The SRI effects:
Does anyone here have experience with SRI funds? If so, which one(s) did you pick and why?
I was looking at regional SRI ETFs to be able to limit US exposure to 50%, but there are no VXUS equivalents in the SRI world. It's pretty difficult to limit US exposure with the SRI offering.
Below are some LLM-made tables.
As I continue to better understand the investment world, I've found out about the concept of Social Responsible Investments (SRI). From the prospectus of iShares MSCI USA SRI UCITS ETF:
> Firstly, companies are excluded if they are identified by the index provider, MSCI, to have any tie to controversialweapons, to be manufacturers of nuclear weapons or related equipment or providers of services auxiliary to nuclearweapons, or to be producers of civilian firearms or tobacco. Companies which are identified by MSCI as engagingin the following activities are excluded if their revenues from such activities (or related activities) exceed thebusiness involvement thresholds set by MSCI for: alcohol, gambling, tobacco, or civilian firearm distribution,nuclear power, adult entertainment, conventional weapons, genetically modified organisms, thermal coal, oil sands,unconventional oil and gas extraction and fossil fuel reserves ownership.
And then, the index keeps only the top 25% of companies that meet the criteria ("best in class").
The SRI effects:
- much less companies in the index (less theoretical diversification)
- the magnificent 7 are not included in the SRI index
- 3-4x bigger TER than plain index funds
- the funds are much smaller, being less liquid.
- some markets are excluded: there are no big enough SRI ETF equivalents that would include Canada, Australia, Hong Kong, Singapore
- the top 10 concentration problems becomes worse with SRI funds (even if the holdings are capped at 5%)
Does anyone here have experience with SRI funds? If so, which one(s) did you pick and why?
I was looking at regional SRI ETFs to be able to limit US exposure to 50%, but there are no VXUS equivalents in the SRI world. It's pretty difficult to limit US exposure with the SRI offering.
Below are some LLM-made tables.
Table 1 — The Vanguard "plain market" stack
| VT (World) | VTI (US) | VXUS (ex-US) | |
|---|---|---|---|
| Stocks | 10,118 per holdings file | ~3,500 (profile) | ~8,860 (holdings file) |
| Top-10 concentration | ~25% | ~35% | ~14% |
| US concentration | ~65% | 100% | 0% |
| AUM | ~$70bn | ~$690bn (Vanguard) | ~$900bn+ |
| TER | 0.06% | 0.03% | 0.05% |
| CAGR 2018–25 | ~11.0% | ~13.0% | ~6.0% |
| Volatility (ann.) | ~16.5% | ~18.5% | ~14.0% |
Table 2 — The SRI equivalents
| World SRI (VT-equiv) | USA SRI (VTI-equiv) | "ex-US SRI basket" (VXUS-equiv) | |
|---|---|---|---|
| Fund(s) | iShares MSCI World SRI (IE00BYX2JD69) | iShares MSCI USA SRI (IE00BYVJRR92) | Europe SRI IE00B52VJ196 + Japan SRI LU1230561679 + EM SRI IE00BYVJRP78 (56/24/20) |
| Stocks | ~373 | ~150 | ~390 (122+60+207) |
| Top-10 concentration | ~30% | ~40% | ~20% (blend) |
| US concentration | ~68% | 100% | 0% |
| AUM | €7.0bn | €2.8bn | €3.0bn + €0.29bn + €2.8bn |
| TER | 0.20% | 0.20% | ~0.22% blended |
| CAGR 2018–25 | 11.3% | 13.6% | 6.3% |
| Volatility (ann.) | 17.5% | 18.3% | 13.0% |
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