Howard Carter, chief executive of Friends Ivory & Sime, could be forgiven for feeling a bit like Tiger Woods - on a good day.

A keen golfer, Mr Carter seemed to have struck the fund management equivalent of a hole in one when he announced the £240m acquisition of the fund mangement arm of Royal & Sun Alliance, the embattled UK insurance group.

The deal, welcomed by investors and analysts, not only means a doubling of assets under management to £70bn, turning FIS into one of the UK's largest independent fund managers, but also a crucial widening of the firm's product portfolio at a time when more investors are looking for alternatives to equities.

Following the deal, 49 per cent of assets under management will be in UK and overseas equities, 39 per cent in fixed income and about 6 per cent in property.

"You wouldn't go on the golf course with only your seven iron," says Mr Carter. "It's nice to have a range of clubs in your bag."

So far, FIS has been known principally for its expertise in socially responsible investing (SRI) - based on the idea that shareholders can get better returns if companies address their impact on society and the environment.

"SRI is not the be-all and end-all of what we do, but it's nice to be in a position where you have a unique selling point," says Mr Carter.

He insists that the acquisition will not dilute the firm's focus on SRI. "If anything," he says, "it will become even stronger because we can take advantage of a larger client base."

Reducing its commitment to SRI would indeed have marked a break with the past. FIS is 67 per cent owned by Friends Provident, the UK insurance company steeped in the Quaker tradition - according to which it is wrong to invest in sectors such as defence, tobacco and alcohol.

"The Quaker antecedent, going back to 1832, means that FP still has Quakers on the board," says Mr Carter. "Of course, they are on the board because they are good at their job."

In 1984, Friends Provident became the first UK company to launch an ethical retail fund that excluded stocks on moral grounds. It was something of a risk. The widely held view was that, by restricting the range of investments, a fund would be left with inferior returns compared with an unrestricted portfolio.

"When these exclusion funds were set up, investors were prepared to accept a degree of underperformance because it met their ethical principles," says Mr Carter. "But over the long term, they haven't underperformed unconstrained funds."

Mr Carter believes the growth of new sectors, such as environmental technology, will bolster the returns of portfolios based on socially responsible investing.

But others remain highly sceptical.

Analysts at Commerzbank, the German bank, recently warned that SRI investors might be unaware of the additional risks attached to the exclusion approach.

Many pension fund trustees are equally wary of narrowing their investment choice for fear of running into conflict with their fiduciary duties.

Firms such as FIS have tried to accommodate trustees' concerns by launching the so-called "engagement" approach to SRI.

"Instead of excluding stocks, we are using clients' shareholder power to canvass the companies they invest in for change," explains Mr Carter.

In 2000, FIS joined a group of fund managers in a high-profile campaign against labour rights abuses in overseas operations of UK clothing companies, which led to the adoption of an industry code.

In most cases, however, SRI firms prefer to be less confrontational.

"It's not always appropriate to go out shouting and protesting and speaking to the media," says Mr Carter. "Often you get the best results behind the scenes."

A 10-strong SRI team provides FIS clients with a regular report about the lobbying carried out on their behalf.

Following the acquisition, FIS is likely to be taken even more seriously because of its increased investment capacity. Mr Carter believes that having "critical mass" will also bolster its standing within the fiercely competitive mainstream fund management industry.

He points to a recent study by McKinsey & Co that estimates that a fund manager needs about E100bn (£62.1bn) in assets under management to exploit benefits of scale in areas such as technology and back office.

It helps that FIS will have a 10-year contract to manage £29.4bn of life assets for RSA - a stable, albeit lower-margin, business. According to Mr Carter, the acquisition would be earnings-enhancing from 2003.

But first, Mr Carter will have to focus on the integration of RSAI, with analysts expecting significant cost-cutting. This includes the closure of RSAI's headquarters in London.

Mr Carter is planning to announce most of the senior management positions within the next two weeks and is hoping to complete the integration by the end of July.

"We need to pick the right people and make decisions on cost savings - and we need to do that quickly so we can get on with the business," he says.

"If these things drag on indefinitely, both the business and our clients will suffer."

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