With the departure of Charlie Thomas after 17 years at the helm of the Jupiter Ecology fund, Trustnet asked several fund pickers which strategies they recommend to hold alongside it in a portfolio or as an alternative.
The fund – which invests in companies providing both products and solutions addressing global sustainability challenges – was the first authorised green unit trust to be launched in the UK, making it one of the oldest portfolios in a now very crowded area of the market.
During his tenure, the £660.3m fund has made a total return of 433.92 per cent, outperforming its IA Global peer group.
Performance of fund vs sector under Thomas
Source: FE Analytics
Under Thomas, the fund was focused on three main areas: infrastructure, resource efficiency and demographics. And this process isn’t expected to change under new manager Jon Wallace who has worked on the Jupiter Ecology fund for over a decade.
However, with news of Thomas’s departure, Trustnet asked a group of fund pickers which ESG (environmental, social & governance) or sustainable strategies they would recommend to hold either alongside the Jupiter Ecology fund, or as another option for those not invested in the fund.
Liontrust Sustainable Future Global Growth
First is Ryan Hughes, head of active portfolio at AJ Bell, who recommended the £1.2bn Liontrust Sustainable Future Global Growth fund as a “strong candidate”, to either hold alongside Jupiter or as a replacement if the ESG credentials meet the investor’s needs.
Hughes said: “Liontrust have hugely bolstered their reputation in recent years through the very strong growth of their Sustainable range.”
The fund is run by Peter Michaelis and Simon Clements, who lead the Liontrust Sustainable Future Equities Process, and Chris Foster who joined the fund in March last year.
Hughes said that while the team are “hugely experienced”, from their years working at Aviva Investors and then Alliance Trust, it’s been during their time at Liontrust “[that] they have really emerged into one of the leading sustainable investment teams in the UK”.
The fund applies Liontrust’s proprietary Sustainable Future process, looking for companies within three themes: improving people’s quality of life either through medicine, technology or education. Secondly; driving the improvements into the efficiency which scarce resources are being used; and, helping to rebuild a more stable, resilient and prosperous economy.
The fund currently has an overweight to technology and healthcare, giving “quite a growth feel to it”, Hughes said.
“Importantly, this is a tried and tested investment process from a hugely experienced team rather than a more recent convert to the ESG cause and that should give investors’ confidence that the sustainable characteristics are deeply embedded in this fund,” Hughes said.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
The fund has made top decile returns over the past three years, making 70.12 per cent outperforming the IA Global sector (33.54 per cent) and the MSCI World index (30.99 per cent). With an FE fundinfo Crown rating of five the fund has an ongoing charges figure (OCF) of 0.89 per cent.
BMO Responsible Global Equity
The next pick also comes from the IA Global sector, the BMO Responsible Global Equity fund and was picked by Chelsea Financial Services managing director Darius McDermott.
McDermott said he picked the £1bn fund because it provides something slightly dissimilar to the Jupiter fund, in terms of sustainability and its company size exposure.
On the first point, McDermott said: “We feel the BMO Responsible Equity fund offers something slightly different given its aim is twofold as it not only seeks to avoid unsustainable business practices; but also, to invest in companies where there are problems to be resolved.”
Launched in 1987, the BMO Responsible Global Equity was originally a purely negatively screening fund and while this screen is still part of the process today, the sustainable investment process is now more layered.
Now, it looks for opportunities within megatrends, such as ageing demographics, demands on healthcare systems, urbanisation and climate change. A final part is engagement, whereby the BMO team aim to work with the companies they invest in to improve its practices to being more ESG focused.
This leads to a concentrated portfolio of 40-60 stocks, said McDermott.
“The risk management of position sizes means it is not the highest conviction strategy, but the concentration still makes it an active core global equities fund with excellent performance,” he added.
Another differentiating part is the increased large-cap exposure.
McDermott said: “Like the Jupiter fund there is a bias towards mid-caps, but the fact the fund holds the likes of Apple, Microsoft and Mastercard in its top-10 indicates the different gist of the BMO fund to its peers.”
The £1.5bn fund is run by Jamie Jenkins and deputy manager Nick Henderson.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
Over three years it’s also beaten the IA Global sector and MSCI World index, making 52.33 per cent. It has an OCF of 0.79 per cent and an FE fundinfo Crown Rating of four.
Royal London Sustainable Leaders Trust
The final pick is one which Adrian Lowcock, head of personal investing at Willis Owen, thinks is complementary to the Jupiter Ecology fund, highlighting the £2.5bn Royal London Sustainable Leaders Trust is run by FE fundinfo Alpha Manager Mike Fox.
According to Lowcock, the trust “has a fairly simple investment philosophy”, looking to invest in companies which both support sustainable change and adhere to Fox’s ethical and sustainable investment philosophy.
Fox’s philosophy involves focusing on the products and services of companies as well as the ESG standards of the company itself, and running an exclusion on tobacco and armament manufacturers, nuclear power generators, and companies that conduct animal testing.
“The core principles mean that every investment has to pass a sustainability test,” Lowcock said.
At least 80 per cent of the fund will be invested in UK companies listed on the London Stock Exchange, holding between 40-70 names at a time.
Performance of fund vs sector & benchmark over 3yrs
Source: FE Analytics
The trust made top-decile returns over three years with a return of 31.43 per cent versus the IA UK All Companies sector’s 2.53 per cent. It has an FE fundinfo Crown Rating of five and an OCF of 0.76 per cent.