Top performing ethical funds

Can being ethical pay off? We take a look at the top performing ethical funds over the past decade and how they pitted against their respective sectors.

Top performing ethical funds

The ethical funds sector has grown notably in recent years with more and more people keen to make their money not only grow – but also work towards social and environmental good.

The financial crisis has also made more people look at companies and how they operate in our society. However, there is still a belief that in order to invest ethically, or with a sustainable focus, you need to give up performance and capital growth.

Research from FE Trustnet has found that the best performing ethical/sustainable funds over the past decade not only comfortably beat their peers in the ethical and sustainable arena but nine out of 10 of the best performers also offer double digit returns when compared to their specific sectors within the Investment Association.

The best performer over the last 10 years has been the Kames Ethical Equity fund, returning just over 160%. Its sector, the IA UK All Companies has returned just over 64% in the same period.

Royal London’s Sustainable Leaders Trust has returned some 147% – more than half of what its sector has done over the same period, according to FE Trustnet data.

Eight out of the 10 of the best performing ethical funds are pitted against the IA’s UK All Companies sector, while eight out of 10 funds also offered double digits returns above their respective sectors over the past 10 years.

While the top 10 funds have performed particularly well compared to other funds with an ethical focus, Charles Younes, research manager at FE Research, has urged investors to look deep into the fund to assess whether it is aligned with the investor’s view on ethical investing.

“Some funds may invest in large companies which have been found to avoid paying the right amount of taxes or bribery scandals for example, while other firms may outsource business to companies with a less ethical stance – so it’s worth really looking into the components of a fund,” he said.

“Ethical investing can be very subjective – so you need to look at how you feel about certain practices and make a call depending on that.

“When analysing historical performance, investors should note that some managers simply negative screen stocks – which means that they simply exclude some sectors, such as mining or oil and gas. As a result, some of the relative gains were achieved from strong sector allocation rather than stock selection.

“What is worth looking for is a manager who is a consistent stock picker, who is able to add value across the cycle.”

 

The top performing ethical funds over the past decade (%)

Fund name                                                          10yr

Kames Ethical Equity                                              160.33

Royal London Sustainable Leaders                      147.33

Premier Ethical                                                         131.02

Standard Life Investments UK Ethical                130.79

EdenTree Amity international                               119.93

EdenTree Amity UK                                                 112.98

Henderson Global Care UK Income                     109.56

Henderson Global Care Growth                             107.23

L&G Ethical                                                                 105.76

Alliance Trust UK Ethical                                           99.31

 

IA UK All Companies                                                  96.21

IA Global                                                                       82.77

Source: FE Analytic

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