Consumer test: Ethical Funds
Consumer test: Ethical Funds
Ethical investment is one of the great financial success stories of recent years. When Friends Provident launched the first UK ethical unit trust "Stewardship Fund" in 1984, experts predicted that the market would eventually reach a maximum £2m.
Talk about an underestimate. Two decades on, £4.5bn has been poured in and investment managers continue to launch Socially Responsible Investment Funds. Now there are almost half a million account holders in the UK, in 62 funds, provided by more than 30 financial services organisations.
Whether you have a pension, investment or hold individual stocks and shares, you benefit from the profit and activities of companies listed on the stock market. The range of issues that initially led to the development of SRI (socially responsible investment), such as a wish to avoid arms and tobacco companies, has grown over the years to include new concerns such as global warming, pollution, over-intensive farming, food additives and companies that don't have fair-trading terms with developing countries.
The increase in SRI managers and associated funds, means that investors can have a more powerful voice in changing the direction of companies, not only by voting rights but by "engagement" - exerting influence through sustained dialogue with the management of companies.
The main criticism levelled at ethical funds is they are likely to disappoint in terms of performance and returns. But the sceptics'.....continued below
Advertisement starts
Advertisement ends
perception that real profit can only be made at the expense of principles, has been regularly proved wrong. A survey by independent data provider Moneyfacts revealed, for example, that the average ethical fund has far outperformed both the average index tracker fund and the FTSE 100 index over the past 10 years.Aberdeen Ethical World
Rank:* 1
Fund type: global growth
Fund size: £41m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,468
Contact: aberdeen-asset.co.uk (0845 300 2890)
F&C Stewardship International
Rank:* 2
Fund type: global growth
Fund size: £113m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,351
Contact: friendsprovident.co.uk (0870 608 3678)
F&C Stewardship Income
Rank:* 3
Fund type: UK equity income
Fund size: £217m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,603
Contact: friendsprovident.co.uk (0870 608 3678)
Standard UK Ethical
Rank:* 4
Fund type: UK growth
Fund size: £67m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,515
Contact: standardlife.co.uk (0845 60 60 100)
Rank:* 5
Fund type: Europe excluding UK
Fund size: £43m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,468
Contact: morleyfm.com (0800 587 4563)
Legal & General Ethical
Rank:* 6
Fund type: UK growth
Fund size: £45m
'Green' criteria: light
3-year perf. to 12.08.05:** £1,390
Contact: landg.co.uk (0800 096 6959)
Aegon Ethical
Rank:* 7
Fund type: UK growth
Fund size: £55m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,501
Contact: abetterway.co.uk (0800 454422)
F&C Stewardship Growth
Rank:* 8
Fund type: UK growth
Fund size: £643m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,543
Contact: friendsprovident.co.uk (0870 608 3678)
Jupiter Ecology
Rank:* 9
Fund type: global growth
Fund size: £145m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,255
Contact: jupiteronline.co.uk (020 7412 0703)
Insight Investment Evergreen
Rank:* 10
Fund type: global growth
Fund size: £30m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,330
Contact: insightinvestment.com (0845 777 2233)
Henderson Industries of the Future
Rank:* 11
Fund type: global growth
Fund size: £50m
'Green' criteria: dark
3-year perf. to 12.08.05:** £1,172
Contact: henderson.com (020 7818 4267)
AXA Ethical
Rank:* 12
Fund type: UK growth
Fund size: £29m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,333
Contact: im.co.uk (0845 300 0479)
Fixed Interest Ethical Funds***
Aegon Ethical Income
Rank:* 1
Fund type: UK bond
Fund size: £32m
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,291
Contact: abetterway.co.uk (0800 454422)
Morley Sustainable Future Corp Bond
Rank:* 2
Fund type: UK bond
Fund size:107m £
'Green' criteria: medium
3-year perf. to 12.08.05:** £1,374
Contact: morleyfm.com (0800 587 4563)
Notes:
* Funds are ranked according to which JS&P considers will provide the best, consistent performance whatever the future holds. But JS&P stresses that investors should ideally choose not one, but a number of funds with difference characteristics which will blend to provide a balanced portfolio that suits their particular ethical criteria, financial requirements and risk profile.
** 3 year performance figures on an offer-to-bid basis with income reinvested. £1,000 invested on 12.8.02 is now worth.
*** The different nature of ethical fixed interest funds means that their performance is not directly comparable with that of ethical equity funds so they have been ranked separately. All performance figures as at 12.8.05.
Best buys
Overall
Our top ranked ethical fund overall is the Aberdeen Ethical World fund which is invested globally for growth using dark green investment criteria, fast followed by the F&C Stewardship International, also a dark green fund invested globally for growth.
By sector
Global growth: If you are looking for capital growth through global investment, the top ranked funds are the Aberdeen Ethical World for dark green investors and the Insight Investment Evergreen for those wanting a medium green approach.
European Growth: One fund, the Morley Sustainable Future European Growth, among the best buy ethicals, will satisfy the needs of investors wanting growth from investment in European, excluding UK, companies. This fund employs medium green investment criteria.
UK growth: The Standard UK Ethical fund with its medium green investment criteria tops the rankings for UK growth funds while F&C Stewardship Growth is tops for those seeking a dark green approach and the Legal & General Ethical fund for those wanting a light green stance.
UK income: One income fund - the F&C Stewardship Income - features in the top 12 ethical funds, ranking third overall. Like its F&C Stewardship global growth and UK growth stablemates, it takes a dark green approach.
Our best buy ethical funds have been ranked by John Scott & Partners taking several factors into account. The most important is the quality of the fund manager and their team. This is assessed by their previous track record, particularly their ability to perform in different market conditions.
JS&P picked the 12 funds that it thinks will provide the best consistent performance, whatever the future. The top two fixed interest ethical funds available, have been ranked separately, because the different nature of these funds means that their performance is not directly comparable with that of the ethical equity funds ranked in the main table.
For each fund we list its type, which tells you whether it is invested in UK, European, worldwide companies or bonds, and whether itin smaller and medium sized companies.
Fixed interest funds
Ethical fixed interest funds use the same screening criteria as ethical equity funds to determine which companies they are able to invest in.
However, fixed interest funds will typically buy corporate bonds issued by the company rather than shares.
They are ideal for investors that want to diversify their risk by investing in different asset classes while still investing ethically. But the different nature of these funds means that the performance of an ethical fixed interest fund is not directly comparable with that of an ethical equity fund.
Finding a specialist adviser
When seeking professional advice on picking the right ethical investments to suit your personal needs, it's worth going to a specialist independent financial adviser (IFA).
You can find an IFA with experience in this area through the following websites: ethicalinvestment.org.uk; uksif.org; eiris.org and unbiased.co.uklar sized ones in Europe and in North America. There is very limited exposure to the Far East and emerging markets. Funds can include oil, pharmaceuticals and banks, but not tobacco, environmental exploitation, armaments, animal testing and companies with poor human rights records.
· Medium green funds apply stricter criteria, but still allow some exposure to oil, banks and pharmaceuticals. Investments are drawn from the UK All Share Index with some exposure to the FTSE 100, and the bulk of investments come from the Mid 250 and the Smaller Company Index. Again similar sized companies are selected mainly from Europe and North America.
· Dark green funds apply strict ethical criteria. Investment in tobacco, environmental exploitation, armaments, animal testing and companies with poor human rights records are generally excluded, and exposure to oil, pharmaceuticals and banking is severely limited.
The bulk of UK investments come from the Mid 250 and the Smaller Company Index, and exposure in Europe and North America is in smaller and medium sized companies.
Fixed interest funds
Ethical fixed interest funds use the same screening criteria as ethical equity funds to determine which companies they are able to invest in.
However, fixed interest funds will typically buy corporate bonds issued by the company rather than shares.
They are ideal for investors that want to diversify their risk by investing in different asset classes while still investing ethically. But the different nature of these funds means that the performance of an ethical fixed interest fund is not directly comparable with that of an ethical equity fund.
Finding a specialist adviser
When seeking professional advice on picking the right ethical investments to suit your personal needs, it's worth going to a specialist independent financial adviser (IFA).
You can find an IFA with experience in this area through the following websites: ethicalinvestment.org.uk; uksif.org; eiris.org and unbiased.co.uk
Guardian Unlimited © Guardian Newspapers Limited 2005
Page: 1234next
Related Links
Advertisement starts
Advertisement ends
Advertisement starts
Advertisement ends
Personal Finance
- Forget the banks: let's hear it for our mutual friends
- Sex, trickery, plundering funds ... scandals behind the safe, unsexy image
- Ice savers have to wait an age
- So where should you put your money?
- Steer clear of those Channel Island 'havens'
- Capital letters
- Debt Samaritans in high demand
- How to cope with the crunch: a guide for young and old
- Banks are collapsing, but cash is still king
- Hopes pinned on stamp duty fillip
Hottest stories in Money
- Government offers 50 billion pounds to shore up banks
- Savers fearful of banking collapse race to find safe place for nest egg
- FTSE up as battered banks and commodities rally
- Lloyds-HBOS merger: What does it mean to me?
- Icesave warms up battle for savers with 7 per cent-plus interest offer
- U.S. passes bailout, focus shifts to fallout
- Why the Irish raiders are after your money
- Believe it or not, house prices are going to soar
- RBS chief under pressure as banks weigh up rescue plan
- Bailout in balance as U.S. House votes
More Links Within This Section
- Analysis
- Consumer news
- Features
- In focus
- Shares news
- Budget 2008
- Cash savers
- Consumer Corner
- Debt: Take control
- Free brochures
- Interest rates
- Recycle
- Bank accounts
- Credit cards
- Credit reports: free
- Currency
- Cut your bills
- Energy helpline
- Free brochures
- Green energy
- Insurance
- Isas
- Loans
- Mortgages
- Property
- Save energy
- Savings
- Shares
- Small business
- A-Z of tools
- Ask the experts
- Bank charges reclaim
- Buy-to-let
- Cars: reducing costs
- Debt advice
- Find an adviser
- Green money
- Legal
- Pensions
- Saving for children
- Share your thoughts
- Tax
- Books
- Home office
