Troy Asset Management has launched an ethical fund which will seek to provide income with the potential for capital growth in the medium term.
The Trojan Ethical Income fund expects to hold between 35 and 50 stocks and will invest while adhering to the ethical criteria set out by the company. The exclusion list includes any investments relating to fossil fuels, pornography, tobacco and certain types of armaments.
Managed by Hugo Ure, the fund will be able to hold up to 30 per cent in overseas stocks. With a bottom-up stock selection process, it aims for a profitable payout. It will also invest in fixed interest securities, indices, deposits and money market instruments.
The fund has no entry or exit charges, but it has an ongoing charge of 1.15 per cent and an annual management fee of 1 per cent. Minimum investment is £1,000.
Comment:
Socially responsible investing is slowly gaining momentum among investors. This form of investment can bridge the gap between maximising returns along with contributing to a larger social well-being. The Chart shows the amount of money invested ethically in the UK until 2014.
The fund operates in the same way as its Income fund but involves a different screening process. While the fund is being promoted as an ethical fund, its manager Mr Ure is of the view that it is first and foremost a UK equity income fund.
Although similar to its Income fund range, the ethical fund’s stock-picking approach will ensure investment in companies that fit the criteria. All funds that describe themselves as ethical carry out a positive and negative screening process.
But while the company has previous experience in managing income funds, this fund is at a higher degree of risk. The volatile nature of the equity markets poses a continuing risk to the fund. While the overseas exposure means a diversified portfolio, it also means it can have some currency risk. However, the biggest risk for an ethical fund is its restrictive nature. Due to this, there are only a limited number of sectors that the manage can get exposure to and thus performance can be subject to those sectors doing well.
