This study provides new evidence on the performance and investment style of retail ethical funds in australia. By applying a conditional multi-factor model and after controlling for investment style, time-variation in betas and home bias, we observe no evidence of significant differences in risk-adjusted returns between ethical and conventional funds during 1992–2003. This result however is sensitive to the chosen time period. During 1992–1996 domestic ethical funds under-performed their conventional counterparts significantly, whereas during 1996–2003 ethical funds matched the performance of conventional funds more closely. This suggests that ethical mutual funds underwent a catching up phase, before delivering returns similar to those of conventional mutual funds.