Socially responsible investing in hedge funds

Socially responsible investing (SRI) has gained popularity in recent years, but the evidence is mixed as to whether SRI affects investor returns. We employ several empirical methods to determine the impact of SRI on returns for U.S. equity hedge funds from 2005 to 2015. Using a propensity score matching technique, we find evidence that SRI hedge funds do significantly outperform similar non-SRI Hedge Funds on average by between 1.50 and 2.67 per cent annually. We find similar results for one subcategory of hedge funds using Fama and Macbeth (J Political Econ 81(3):607-636, 1973) regressions, and our findings are stronger when we examine returns from subperiods that do not include the global financial crisis. © 2016 Macmillan Publishers Ltd.