One of the most interesting launches of late is the Rathbone Global Sustainability Fund.
This new global equity portfolio will be managed by David Harrison, who joined Rathbones four years ago as a manager on the Rathbone Heritage fund.
Since joining the company, Mr Harrison has worked closely with Carl Stick, an equity manager I rate very highly, and the investment process for this fund will be very similar to that used by Carl’s income team: focusing on fundamentally strong companies with high levels of cash generation.
While there is no income target for this new fund, its investment approach is likely to produce a natural yield of around 2 per cent.
The difference will be that Mr Harrison will engage with companies to encourage positive change. He will actively look for businesses whose activities, or ways of operating, are aligned with sustainable development and, therefore, support the achievements of the UN Sustainable Development Goals.
For example, health and well-being, resource efficiency, sustainable innovation and infrastructure, decent work and energy and climate.
He will also actively avoid businesses involved in unethical or unsustainable practices. The exclusion criteria included are alcohol, animal testing, armaments, extraction of fossil fuels, gambling, nuclear power, pornography, tobacco and poor employment, environment and/or human rights practices.
Mr Harrison has a wealth of experience in the environmental, social and governance (ESG) space, having been involved in the day-to-day integration of ESG analysis at Hermes and the fund manager of an ESG global equity mandate at Merrill Lynch Portfolio Managers.
He will be helped by Rathbone Greenbank Investments, a dedicated ethical and sustainable investment division that already provides screening services for the Rathbone Ethical Bond fund.
Mr Harrison will give them his stock ideas and they will test the company to see if it passes muster. This process has worked exceptionally well with the bond fund and Rathbones believes this can be successfully replicated in an equity fund. It seems a logical step.
The ultimate portfolio will have invest in around 30-50 stocks. Approximately a quarter is likely to be invested in medium-sized companies, which Mr Harrison believes to be a ‘sweet spot’.
This is because company management are more engaged and you can find lots of previously undiscovered ideas.
Approximately 5 to 6 per cent of the fund will be invested in Asian and emerging markets at launch but, with a Mandarin, Cantonese and Japanese speaker on the team, Mr Harrison hopes to increase this weighting in the future, as company practices improve. Approximately 30 per cent will be in Europe, 8 to 9 per cent in the UK and the rest in the US. It will have an ongoing capped charge of 0.9 per cent.
The fund will have a capped ongoing charge of 0.9 per cent. I would rate it 3.5 out of 5.
Darius McDermott is managing director of Chelsea Financial Services
