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When investing for our children, we often have different views to those applied to our own investments; one of which is the desire to invest ethically. Ethical investments can come in different forms, commonly referred to as 'shades of green'. Funds described as dark green are those with the most stringent policies toward investing ethically. Typical ethical funds avoid investing in companies whose activities can be harmful to the environment and/or society as a whole; these include those in the tobacco, arms and non renewable energy sectors.
Taking into account the common goals we have when investing for our children, the Ethical Junior ISA has a balanced outlook on risk, which means it is willing to accept more risk than one taking a cautious approach would, in search of attractive levels of growth. The funds used in this portfolio diversify by investing across different assets and areas; however, there is more focus on riskier assets and markets that have the potential to deliver these higher levels of growth.
Here are the details of each of the funds that make up the portfolio, click a fund name for more information on the fund.
|Fund name||Original Holding||Historic yield||Saving via
|FE Crown Rating|
|F&C Ethical Bond||20.00%||3.55||5.00%|
|Stock-picking analysis is driven by credit research and the ethical screening process to identify companies that demonstrate a commitment to honesty, integrity, fairness, equality and respect for human dignity. There is a strict monitoring process for risk and investment policy. The fund benefits from being managed by a FTSE4Good company and is included in the portfolio as the management team and process is consistent with the performance and the volatility being good for an ethical fund.|
|F&C Stewardship Income||20.00%||3.62||5.00%|
|This fund aims to generate an above average and increasing income with capital growth potential. Broadly companies suited to the portfolio are those that make a positive contribution to society as well as furthering sustainable development and taking action to improve the environment, conserve resource and operate in a transparent manner. Ethical criteria are comprehensive with a mixture of positive and negative issues driven by F&C’s ethical, social and environmental policies. The fund can invest into certain restricted activities providing other conditions are met, such as an oil company with an interest in renewable energy. The fund is included in the portfolio due to its strong processes.|
|Aberdeen Responsible UK||15.00%||1.67||4.25%|
|This is a fairly unique fund. Whilst most ethical funds select companies that are already meeting or working towards certain ethical standards, this fund invests in companies with an aim to improve or implement these practices. An initial buy-list is generated through an assessment of future growth. Companies involved heavily in certain negative activities are excluded and final investments are made into those where the team believe the management will be receptive to change. Aberdeen states the concept is to encourage all investee companies to be better corporate citizens. The fund is included in the portfolio due to the long-term management team and process, which has resulted in reasonable returns in difficult market conditions.|
|Ecclesiastical Amity International||15.00%||1.26||5.00%|
|The aim of this fund is to achieve long-term capital growth with a reasonable level of income through a diversified portfolio of international companies. It is an ethically screened fund that uses a combination of negative and positive selection criteria. In respect of negative screening, the manager avoids companies whose activities derive in excess of 10% of their pre-tax profit or turnover from alcohol production, gambling, pornographic and violent material, tobacco production, strategic armaments, animal testing and intensive farming. The manager particularly seeks exposure to businesses with an identifiable and sustainable competitive advantage at a comparatively low price. There is a preference for companies with transparent accounts, and a straightforward business model with positive free cash flow. The fund adds excellent long-term performance record and an established manager to the portfolio.|
|Rathbone Ethical Bond||15.00%||5.38||3.00%||n/a|
|This is a corporate bond fund that applies negative and positive criteria when selecting issuers. Economic views focus on the direction of government bond yields and credit quality trends. Corporate bonds are assessed using the ‘Four Cs’; character of management, capacity to pay back debt, collateral to back the payments and covenants. The research is then overlaid with the view of the Ethical Team, which completes due diligence into each company. Criteria are wide ranging and cover positive attributes and avoid most negative activities. The long-term management team and process, resulting in consistent returns, is the reason for its inclusion in the portfolio.|
|Royal London Ethical Bond||15.00%||4.57||3.00%|
|The management team combines in house research with ethical screening results supplied by EIRIS. Analysis carried out on individual bonds pays particular attention to security, covenants and credit event recovery rates as the team believes in not solely relying on credit rating agency opinions. The fund was launched in January 2007 at which time the fund avoided investment in companies with more than 10% turnover derived from tobacco, gambling, alcohol, pornography and armaments. In January 2009, this was expanded to incorporate environmental, animal testing and human rights criteria. The fund has continued to perform comparatively well since the policy and management changes in 2009. This and the competent management is the reason for its inclusion in the portfolio.|
|Selected Benchmark||TQ Invest Bal. Composite|
Past performance is not a reliable indication of future returns. The value of your investments and any income can fall and rise and you may get back less than you invested.
|Portfolio||12/10/2010 to 12/10/2011||12/10/2009 to 12/10/2010||12/10/2008 to 12/10/2009||12/10/2007 to 12/10/2008||12/10/2006 to 12/10/2007|
|Ethical Junior ISA Portfolio in GB||-1.67||13.53||20.38||-22.12|
|TQ Invest Bal. Composite||3.27||9.19||23.03||-18.08||7.34|
The performance figures above are calculated on a bid to bid basis with net income reinvested. Figures for indices are always shown without income reinvested. The Discrete Performance table shows the percentage change in sterling, on a bid to bid basis with net income reinvested, for the last five (or where the fund has been available for less than five years, all) complete 12 month periods, up to the last full quarter. Information is shown as unavailable if prior to launch of the fund, or if the fund has been available for less than 12 months. Past performance is not a guide to future performance. The value of any investment, and any income from it, is not guaranteed and can fluctuate depending on investment performance (and currency exchange rates where a fund invests overseas).