CIS Sustainable Leaders Trust- Out Foxing the Market 13.02.07
The Co-operative Insurance (CIS) Sustainable Leaders Trust, a green and ethical fund managed by Mike Fox, is in premier position for the twelve months up to the end of January 2007 in the UK All Companies unit trust sector.
In the twelve months to 31st January, the CIS Sustainable Leaders Trust has returned 29.3%, compared to 13.2% returns produced by the FTSE All Share index and 13.3% produced by the UK All Companies market. Over 36 months the fund has returned 88.6% compared to an average of 57.5%.
Ethical funds have in the past been attacked from two main angles, firstly because they are limited in the companies they invest in they cannot benefit from the potential gains and spread risk of a “normal” fund. The CIS Sustainable Leaders Trust for example has screened the 600 or so companies available to a fund manager and so far approved 170. In return proponents of ethical investing point out that in this era of consumer concern about climate change and the environment in general, as well as a growing ethical consumer sector, companies with a strong and visible Corporate Social Responsibility policies will have a competitive advantage over those who fail to preempt consumer and regulatory trends.
Previously this idea has been dismissed as wishful thinking, however in 2006 the oil sector has taken a beating and there have been a number of strategic Merger and Acquisitions (M&A) as mainstream companies look to move into more forward thinking companies. Mike Fox, Fund Manager for CIS Sustainable Leaders Trust, said: “Many businesses have become very profitable by tapping into the eco-pound and this has led to takeover interest from larger companies seeking to increase their share of a market that can no longer be considered niche. “As such businesses tend to feature more prominently in SRI funds than they do in other unit trusts it has benefited their performance.” Mike Fox cites such examples as Scottish Power, the second largest developer of wind power in the USA, which received a takeover approach from a Spanish utility, and Enterprise, one of the largest water leakage repair businesses in the UK, which received a bid from a private equity company. According to information published by the CIS the top holdings of the Sustainable Leaders Trust are Spice Plc, Scottish and Southern Energy Plc, Galliford Try PLC, Shaftesbury Plc, Findel Plc, RPS Group Plc, Enterprise Plc, Cranswick Plc, SIG Plc and Connaught Plc- these 10 investments making up 41.56% of the portfolio. The second main criticism is that ethical funds have added layers of research over and above the standard fund as the cost of screening companies, the time involved with active engagement, and the on-going monitoring are all costs that are passed on to the investor and thus eat away at potential profits. In reality however this doesn’t really pan out, firstly the limited companies available tend to lead to a more buy and hold attitude rather than constant turnover of equities of a standard actively managed fund, which reduces the transaction fees passed onto the investors, secondly the increased research into the companies on the approved list means that the fund manager has a richer depth of knowledge of each company and its prospects. As Mike Fox has proved being ethical can be highly profitable.
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