EDENTREE AMITY UK: Top performing fund steers clear of the ‘sin’ stocks
Investment fund EdenTree Amity UK was way ahead of its time when it launched 32 years ago. It was one of the first funds to have a female – Sue Round – as its manager and it was also among the pioneers in running an ‘ethical’ investment portfolio.
Little has changed since 1988. Round is still the fund’s lead manager, although she is now assisted by Ketan Patel, while the fund’s holdings are all selected for the responsible and sustainable way the companies go about their business.
Although the fund’s assets are valued at a modest £119million, its underlying investment performance is exceptional. Over the past ten years, Amity UK has outperformed both the FTSE All-Share Index and the average fund among its peer group with a return of 127 per cent. Over the past year, its losses are less than those of the index and its peers.
Over the past ten years, Amity UK has outperformed both the FTSE All-Share Index and the average fund among its peer group with a return of 127 per cent
It’s a record that Patel is immensely proud of. He says: ‘In pursuing our goal of only investing in companies that make a positive contribution to both society and the environment, we have not had to sacrifice investment performance. Indeed, we’ve delivered outperformance on a consistent basis. Our track record is good whichever way you look at it.’
Patel is confident that with an increasing investor focus on ‘ESG’ – environmental, social and corporate governance – issues, Amity UK will get the recognition its investment record deserves.
The fund has no truck whatsoever with any ‘sin’ stocks. This means it will not invest in companies that generate revenues from gambling, alcohol, armaments, tobacco and pornography.
The fund also avoids businesses that test cosmetic or household products on animals – although it will invest in pharmaceutical companies that use animals to test new products. Both GlaxoSmithKline and AstraZeneca are among its top 10 holdings.
The fund invests in pharma companies that use animals to test new products
While such screening rules out many companies, Patel says it still allows the fund to invest in 60 per cent of the companies that comprise the FTSE 100 Index – and 75 per cent of those that make up the FTSE All-Share.
‘It’s a large universe,’ he says. ‘What you will not get with this fund is an investment that hugs the performance of the FTSE 100 or FTSE All-Share.’
Currently, the fund has 68 holdings with an emphasis on companies outside the FTSE 100. As well as ticking all the key ‘ESG’ boxes, the companies it invests in all tend to have resilient earnings.
They also primarily operate in sectors where high barriers to entry make it difficult for new rivals to eat into their market share. Patel describes himself as an ‘optimist’ which explains why he believes the economy will recover strongly in 2021 after a ‘tough 2020’. ‘2021 will be a good year for the UK,’ he says, ‘and a great range of companies are gearing up for it.’
Although the fund pays a dividend twice a year, it is modest – equivalent to a fraction below 1.8 per cent a year. Furthermore, like all funds investing in the UK, the dividends it receives from its holdings have fallen in response to economic lockdown. P
atel is confident that there will be a dividend ‘bounce back’ next year. The fund’s overall annual charges are modest at 0.79 per cent.
Wealth manager Interactive Investor has a list of 30 preferred ethical investment funds. Amity UK does not make it on to the list with Interactive opting instead for six other funds with a UK bent – BMO Responsible Income, L&G Ethical, Liontrust UK Ethical, Royal London Sustainable Leaders, Unicorn UK Ethical Income and Trojan Ethical Income.