📄 Abstract
This research paper is aimed at comparing the effectiveness of portfolio diversification of ESG mutual funds and conventional equity mutual funds through a multi-factor strategy. The current dynamic financial landscape is not only driving investors to seek greater returns but also responsible and sustainable investment choices. Unlike traditional equity funds, ESG funds account for environmental, social and governance factors when picking investments, with financial performance being a primary concern in conventional equity funds. The primary objective of the research is to learn the performance of both kinds of funds in terms of risk, return and diversification. In this study, ten ESG funds and ten conventional equity funds have been chosen and examined with the help of secondary data using the credible financial websites. Such important aspects as Net Asset Value (NAV), Assets Under Management (AUM), expense ratio, standard deviation, Sharpe ratio and portfolio composition have been examined. Our analysis demonstrates that ESG funds tend to have more stable returns with moderate risk and more downside coverage. Conversely, traditional equity funds have greater returns potential, but they are also riskier and more volatile, particularly those funds that hold mid-cap and small-cap stocks. It is also revealed that ESG funds are more concentrated on large-cap companies thus they are less risky as opposed to equity funds that exercise more flexible approach to investing. All in all, both forms of funds have their pros and cons, and a mixed portfolio of ESG and traditional equity funds may assist an investor to diversify and grow more in the long-term. This study assists investors to comprehend the significance of financial performance and responsible investing when making investment choices.
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📚 How to Cite:
H N Tilak , PORTFOLIO DIVERSIFICATION EFFICIENCY OF ESG FUNDS VERSUS CONVENTIONAL EQUITY FUNDS WITH MULTI FACTOR MODEL , Volume 13 , Issue 7, July 2026, EPRA International Journal of Economics, Business and Management Studies (EBMS) , Pages: 107 - 115 , DOI: https://doi.org/10.36713/epra30876