Investing in funds which support only socially or environmentally responsible companies has grown in popularity during recent years as investors become increasing aware of the effects their actions and investments can have, but this pattern of growth in the ethical investment sector slowed in the second quarter of 2008.

The credit crunch has encouraged investors to look for funds that offer the highest returns for the lowest risk, with some sacrificing their ethics in favour of profits, the IMA‘s quarterly review revealed this month.

While ethical investment is still strong, total ethical funds under management fell to £5.2million in the second quarter of the year, down from £5.4billion in the previous quarter and £5.7billion in the second quarter of 2007.

Tracker funds also took a hit, another sign of uncertainty in the money markets reflecting the way people invest, seeing total investment under management falling to £23.8billion, a three per cent drop on the previous quarter and a significant 13 per cent lower than the corresponding quarter in 2007.

Meanwhile, investment growth in other areas remained strong, with total fund of funds under management climbing to £33.3billion by the end of the second quarter, a growth of two per cent on the previous quarter and four per cent compared to the same quarter the previous year.

Commenting, Richard Saunders, chief executive at the IMA, said: “Funds of funds sales have proved resilient over the last nine months, while retail sales in other sectors have slowed down markedly. Sales continued to be buoyant in the second quarter.

“This almost certainly reflects a wish by investors and their advisers to take advantage of the diversification they can offer in turbulent markets, but also reflects a longer underlying trend to invest in this product type.”

© Fair Investment Company Ltd