Socially Responsible Investing: Ariel Fund (ARGFX)

Insider Monkey, your source for free insider trading data, showed that the Vice Fund (VICEX) didn’t have any alpha during the past 5 years. Large management fees essentially captured all the alpha the strategy generated. An alternative to naughty investing is socially responsible investing. This might be a sound investing strategy because environmentally conscious consumers usually don’t mind paying a premium for the goods and services they receive. As a result some of these companies might have higher profits.

One mutual fund that invests in socially responsible stocks is the Ariel Fund (ARGFX). We didn’t want to pick the largest socially responsible investing mutual funds because better performing funds usually get bigger. So by picking the largest ones, we could inadvertently pick the better performing mutual funds. What we did was search for the best performing socially responsible mutual funds before 2005. Among those, we separated those that invests in US equities. Then we randomly chose the Ariel Fund (ARGFX). It’s also one of the larger socially responsible mutual funds around. It has more than $2 billion under management, and has been around since 1986. Its expense ratio is 1.06% and its annual turnover is 40% – which is quite low for mutual funds. So, Ariel seems to represent socially responsible mutual funds.

We obtained monthly returns from Yahoo! Finance and used Carhart’s four factor model to calculate Ariel Fund’s alpha. Yahoo has returns starting from July 1996. Our regression for the entire 14 year period shows that the Ariel Fund had a 2.7 basis points alpha per month. This isn’t really that different from zero. The fund’s market beta is 0.94, has a small cap tilt, and invests in value stocks. Remember we picked this fund because of its spectacular performance before 2005. What we really are interested in is its performance over the past 5 years. We calculated Vice Fund’s (VICEX) alpha for the past 5 years, so we can compare those results to those of the Ariel Fund.

Unfortunately, the Ariel Fund (ARGFX) didn’t perform well during the past 5 years. Its monthly alpha was -23 basis points. Its market beta was 1.09 and the fund invested disproportionately in small value stocks with negative momentum. This means Ariel Funds investors underperformed by more than 2.5 percentage points per year. Considering its expense ratio is around 1 percent, this investment style didn’t have any alpha even before deducting expenses.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!