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Ethical investor eschews oil, tobacco and mining to beat FTSE
Despite ruling out many of the FTSE 100 heavyweights, Susan Round, manager of the Ecclesiastical Amity UK fund, has beaten her benchmark over the past three years.
Ethical investing can mean leaner pickings among the FTSE 100 index, as a number of sectors fail to meet ethical, green and social criteria. But fund manager Susan Round, who runs an ethical fund at Ecclesiastical, says she has no problem finding stocks to invest in despite ruling out 40% of the FTSE 100 index before she has even started looking.
‘We’re not including oil, tobacco, or mining… though we have a preference for value-orientated stocks. We have quite a large exposure to healthcare and pharma, which are areas that meet our screening analysis and provide some stability during periods of volatility,’ She says.
Round manages the Ecclesiastical Amity UK fund and was a Citywire A-rated manager in June and April of this year.
‘If you look at the split between mid- and large-cap you’ll most likely see there’s a bigger proportion of mid-cap stocks in this fund. Approximately 40% is invested in FTSE 100 stocks with the bigger part in mid-cap, that’s where we think the opportunities lie,’ she adds.
The exclusion of a large part of FTSE 100 stocks comes down to the ethical screening process put in place by Ecclesiastical fund management.
‘The fund operates both negative and positive screening, which means we have a range of things that we exclude, which include alcohol, tobacco, gambling and arms. But in applying a negative screen it’s also important to try and capture positive aspects.
‘We try to choose companies that have produced a positive contribution either through the way they run their business with community involvement, good corporate governance, labour relations or producing products that are beneficial to the environment.’
The fund has given a total return of 58.7% over the past three years, outperforming the FTSE All Share index's total return of 47.4%. Round says mid-cap and defensive stocks have been the biggest contributors to the fund.
‘Dunelm is an out-of-town retailer of household goods and bedding. It’s a relatively new company in the sense that it has only been around four or five years. It’s a very attractive business model and fundamentally it is a well-managed business and has been a very good performer.
‘We’ve also had a good contribution from healthcare with GlaxoSmithKline (GSK.L), which has been one of our top contributors that we’ve held for a long time. Dechra (DECP.L) is an animal pharmaceuticals company and is well-run company with potential for growth.’
Although Round says although she has no problems finding ethically sound large- and mid-cap companies to invest in, the portfolio currently has a cash holding of 12.3%.
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- GlaxoSmithKline PLC (GSK.L)
- Dunelm Group PLC (DNLM.L)
- Oxford Instruments PLC (OXIG.L)
- Dechra Pharmaceuticals PLC (DECP.L)
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