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Which SRI funds performed best in 2016?

10 January 2017

While ethical and SRI funds may be a niche investment strategy for the majority of investors, some offerings delivered strong returns last year.

By Rob Langston,

News editor, FE Trustnet

Ethical investment can often polarise investors, yet the the funds continue to attract investors and provide significant returns for those willing to research the sectors.

Net retail sales of ethical and socially responsible investing (SRI) funds reached £600m during the first three quarters of 2016, according to the most recent information available from the Investment Association. In comparison, the sector recorded net retail sales of £639m for all of 2015.

Some investors might be forgiven for swerving a sector that remains difficult to benchmark, particularly after some of the poor returns seen in 2015.

However, some of the best performing funds of 2016 delivered significant double-digit gains, making a compelling argument for further study.

Below, FE Trustnet looks at some of the best performing ethical funds of the past year.


Candriam Sustainable North America

The best performing ethical/SRI fund in the Investment Association universe was the four crown-rated Candriam  Sustainable North America fund, which delivered a 31.61 per cent total return.

Candriam Sustainable North America vs sector in 2016

 

Source: FE Analytics

The $281.2m fund, managed by Candriam global head of quantitative equity management Bart Goosens, invests in North American companies based on socially responsible or sustainable criteria.

Sitting in the IA North America sector, the fund outperformed its average peer, which delivered a 29.31 per cent gain, during 2016.


North American funds were among some of the strongest performers of last year. While uncertainty was rife during the presidential election campaign, the market rallied once the result was known.

In dollar terms, the fund increased by 10.33 per cent during 2016, still an impressive gain after the market challenges of last year.

The largest holding in the portfolio is Alphabet, the parent company of internet giant Google. It also counts Canadian National Railway Company, Pepsico, Campbell Soup and Amazon.com among the top five holdings at the end of November.

Halifax Ethical

Global equities fund Halifax Ethical was also among the best performing ethical/SRI funds last year, recording a 31.30 per cent return in 2016 compared with a 23.33 per cent gain for the average IA Global member.

The £163.1m fund aims to achieve capital growth investing in a portfolio of international companies considered ethical, using a negative screen to exclude undesirable investments.

The one crown-rated fund’s standout performance follows a poor showing in 2015, during which it made a 10.16 per cent loss. It did beat its average peer in the previous two years, however.

As well as Halifax Ethical a number of other global-focused funds were also among the top performers of 2016.

The £151.9m one crown-rated Aberdeen Ethical World Equity fund also delivered strong gains, again after a difficult 2015. In 2016, the fund delivered a 31.11 per cent return following a 10.13 per cent loss during the prior year.

Elsewhere, the two crown-rated Old Mutual Ethical fund was up by 29.96 per cent last year. Claudia Quiroz took over management of the fund in December 2015, making a significant impact during her first calendar year at the helm of the fund.


Stewart Investors Global Emerging Markets Sustainability

As a niche sector, SRI and ethical funds may already make up just a small part of an investor’s portfolio. Yet the wider range of sub-strategies available within the ethical/SRI space are also worth exploring.

The five crown-rated Stewart Investors Global Emerging Markets Sustainability fund already has a strong pedigree thanks to its well-renowned investment team.

The £335.7m fund is managed by FE Alpha Manager David Gait and Jack Nelson, however, its focus on emerging markets helped the fund to a solid 2016 performance.


The fund was up by 28.05 per cent during a year where emerging market strategies returned to strong growth after several years of underperformance as investors turned away from the developing world.

The Stewart Investors Sustainability funds were strong performers last year, delivering returns in excess of 20 per cent each.

Stewart Investors funds performance over 1yr

 

Source: FE Analytics

While emerging markets were among the strongest performing geographical areas for equities last year, the Stewart Investors long track record covering the markets and operating in the ethical/SRI space shone through in 2016.


Pictet Water

One final play within the ethical/SRI fund space is to take a specialist thematic approach.

Asset manager Pictet has a well-established thematic investment philosophy, focusing on “companies that will succeed in the future by identifying the long-term trends that are changing the world we live in”.

Over the years the firm has launched funds catering to many different themes it has identified as potential areas for growth and investment.

One of the funds - the Pictet Water fund - was the best sector-specific ethical/SRI fund during 2016, delivering a 27.44 per cent gain last year.

However,  its sister funds also performed strongly. The Pictet Timber fund was up by 26.50 per cent in 2016, while Pictet Agriculture rose by 24.29 per cent. Pictet Clean Energy also rose by 22.76 per cent last year.

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.