Exit vs. Voice

Abstract: This thesis examines the relationship between fund performance and the choice of strategy when an invested asset is reclassified to a fund’s exclusion’s list. The two choices of strategy are divesting the asset or using active ownership methodology by communicating with the asset. To examine the performance of the funds, Jensen’s alpha, Sharpe ratio, Information ratio and Treynor ratio is calculated. A total of 31 active Swedish global equity funds is in the analysis with 17 of them using the active ownership strategy and 14 using the divestment strategy. The study resulted in conclusive results that a Divestment First strategy performs better than an Active Ownership First strategy. There could be multiple reasons to why this happens, with the most important being the costs of time and capital by investors when trying to influence its assets to become better. A recommendation for all funds to change to a Divestment First strategy is not suggested, since research shows that divestment leads to no or negative progress on a company level.