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Analyst: The Co-operative Asset Management

Advisers might consider The Co-operative Asset Management a new enterprise, even though it has been running money for the Co-operative Group for more than 20 years.

By Stephen Wilmot | Published Nov 02, 2009 | comments

It used to distribute its products purely through the group's proprietary distribution channels, like a retail bank, and has only recently started the long process of opening up to IFAs and gradually raising awareness of its brand.

It comes as no surprise, given the position of the overall Co-op brand, that the fund company puts particular emphasis on its credentials in socially responsible investing (SRI). If the firm is known at all among independent intermediaries, it is for the CIS Sustainable Leaders unit trust, managed by Mike Fox. With a strong five-year track record as well as a focus on UK stocks deemed to benefit society, the trust seems to disprove the assumption that social responsibility comes at a cost.

This is no accident, claims Mr Fox, one of whose core beliefs as an investor is that the SRI tag cannot be a substitute for strong performance. When the manager took over the fund in 2003, it was a traditional ethical fund with strict negative screening criteria and an underwhelming track record. Mr Fox set about updating the approach, building a new investment universe that reflected more contemporary concerns, such as the environment and human welfare. He stresses the psychological and financial importance of constructing a portfolio on a positive rather than a negative basis.

"Ethical investing was largely based around exclusions. You would take certain areas of the market out and as a fund manager you would have to make do with what was left. For us, that's a less appealing approach than doing something positive," he explains.

He underlines the need for positive investment themes to deliver positive performance – and their potential to do so. "You're trying to create a symbiotic relationship. If you can find companies that operate in areas like infrastructure, healthcare or climate change - that societies are clearly going to have to spend a lot of money on - they're going to have better financial prospects," he explains.

As the name of his fund suggests, Mr Fox's philosophy surrounds 'sustainable' investing. This is also the tag that the Co-op has adopted for two recent launches into the IFA marketplace, the Sustainable Diversified and Sustainable World unit trusts. The Diversified fund invests in 'sustainable' themes across a range of mainly UK-based asset classes, while the World fund, which will also be managed by Mr Fox, seeks exposure to the same themes predominantly through global equity markets. The new vehicles sit in the Cautious and Balanced Managed sectors, respectively.

The focus on a 21st century version of SRI is one plank of the Co-op Asset Management's strategy. The other is to sell its services through third parties, particularly IFAs. The shift into the broader IFA market place started when Paul Sharman joined as managing director and chief investment officer in 2004 with an explicit brief to develop the business. The company has been involved in preparing the ground for much of the five years since.

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