‘Public ignores good money funds’: IA

‘Public ignores good money funds’: IA

The investing public appears resistant to putting more money into ethical or socially responsible funds, figures from the Investment Association have suggested.

Although ethical ‘good money’ funds have been available to retail investors since 1984, IA statistics show this sector has stuck at 1.2 per cent of total funds under management since 2005.

F&C Stewardship Growth Fund was the first-ever retail ethical fund, which launched on 1 June 1984.

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The past 10 years has seen net retail sales for ethical funds range from £16m in 2012 to £474m in 2007. In comparison, tracker fund sector net retail sales ranged from -£253m in 2006 to £4.85bn in 2014.

This is despite the weight of opinion moving in favour of SRI and associated themes in recent times. For instance, the FTSE Group launched its FTSE4Good Index – based on corporate SRI themes – in 2001.

Adrian Lowcock, head of investing at Axa Wealth said investors should note that the FTSE4Good UK benchmark has beaten the FTSE All-Share Index, returning 48 per cent against 43 per cent over the five years to 8 October 2015.

Mr Lowcock said: “Much of this has been driven by the performance of oil and mining sectors, which have suffered over the past few years. Many ethical funds have no exposure to these areas, and therefore have protected investors from the fall.

“In addition, ethical funds will have benefitted from the outperformance of smaller and mid-sized companies. As a result of the filters ethical funds use there is a bias away from large companies which has also helped performance.”

Geoff Mills, director at fund research and ratings group Rayner Spencer Mills Financial Consulting, said: “A growing number of investors are placing a priority on the impact companies and their products have on society. No longer do you have to sacrifice performance for your principles.”

Adviser view:

Jason Hollands, managing director at London-based investment and financial planning firm Tilney Bestinvest, said: “For many the whole concept of ‘ethical investing’ is simply like Marmite – they either love it or hate it. Such funds will never appeal to everyone.

“But ethical investing has a place, and with data showing that well-managed ethical funds have held their own when it comes to delivering strong long-term performance versus traditional funds, this market logically deserves to be bigger than it currently is.”