Degree of Active Management and Performance of Storebrand’s ESG-labeled Mutual Funds

Abstract

This thesis investigates whether Storebrand’s ESG labeled mutual funds can outperform their benchmarks, and how likely that is. We analyze five active mutual funds that have high scores on Storebrand’s proprietary sustainability index. We apply performance and active management measures that are well known in the finance literature. Simulation methods are also conducted to calculate the probability of outperformance. In addition, we apply the Black-Litterman framework to calculate the loss in expected riskadjusted returns as a result of a smaller investment universe. We find that the higher fees of Storebrand’s high-ESG mutual funds significantly harm performance, and lower the probability of outperformance. Finally, the exclusion of certain stocks or sectors can have notable impact on the Sharpe Ratio.