This £222m fund was recently made a member of the Investment Adviser 100 Club 2016. Manager Mike Fox explains: “The trust aims to invest in companies with a benefit to society. This means they have products and services that have some kind of social benefit, such as healthcare, technology or infrastructure; and they lead their industries in environmental, social and governance management.”
Mr Fox describes his investment process as “logical” and, while his approach to investing sustainably focuses largely on positive screening, there are certain types of companies he avoids holding.
“I think if you’re in the sustainable space it is right to give some absolute assurances in certain areas,” he says. “We wouldn’t invest in any company that’s involved in armaments, tobacco, nuclear power generation and animal testing for household goods or cosmetics. After that, it’s a positive screen of net benefit to society – that principle defines what we invest in.”
One of the positive screens he looks at is corporate governance. He continues: “We look at the environmental and social policies of the businesses that are potential opportunities for us; if you start with an index such as the MSCI World and you apply the products and services screen and the governance screen, looking at the environmental and social performance, it’s amazing how quickly the universe gets whittled down.
“We write a note on each company in terms of suitability, and we have an external advisory committee that assesses whether companies meet our criteria. Once a company has been through that process, it comes down to risk reward and what we think the upside of the investment is.”
Once he identifies the companies that meet his criteria, he tends to “stick with them”. “We don’t tend to move the fund to respond to economic cycles,” he notes.
|EXPERT VIEW - Robert Love, head of research, Asset Intelligence|
Although the number of ethical or sustainable funds is limited in this sector, we think this is a strong option for investors. Mike Fox is an experienced pair of hands and has managed this fund since launch in 2009. Although the Mixed Investment 40-85% Shares sector is diverse and this fund will typically retain an equity bias, he has delivered first-quartile returns in every calendar year except one. This growth-oriented portfolio is dominated by exposure to the US and UK, with a particular focus on large-cap businesses.
Turnover in the portfolio is also low, with no major changes in the past 12 months. “Some of these bigger picture themes – such as healthcare, technology and infrastructure – are five- to 10- to 20-year themes, really. In that respect, you won’t see a lot of change in terms of what we own. Much of what we do is risk management and making sure we’re not overly exposed to one area.”
The fund sits at level five out of seven on the risk-reward spectrum, according to the key investor information document. An ongoing charge of 0.78 per cent applies to the C accumulation clean retail share class.
The fund has outperformed its peer group over one, three and five years, data from FE Analytics shows, placing it in the top quartile of the IA Mixed Investment 40-85% Shares sector. Over five years to July 20, the fund returned 86.7 per cent, against the sector average of 36.9 per cent. In the past year to July 20, the fund delivered an 11.9 per cent return, compared to the average 4.6 per cent return generated by the peer group.