The company has introduced this fund because it believes investors should not have to choose between performance and ethical considerations. The fund aims to provide income and preserve capital by investing in corporate bonds that meet a set of ethical criteria. These bonds will mainly be denominated in sterling.
The ethical nature of this fund means it will not invest in companies with significant trading interests in Alcohol, armaments, gambling, tobacco and pornography. Significant trading interests is defined as having greater than 10 per cent of turnover in one of these sectors or 10 per cent of turnover in these sectors combined.
The fund will be managed by Sajiv Vaid and Stephen Peirce. Vaid joined RLAM is 2001 and currently manages the Royal London corporate bond trust and Royal London pooled pension corporate Bond Fund. Peirce joined RLAM in 2005 and co-manages RLAM’s government bond portfolios. He also has experience in managing corporate bonds.
The managers will draw on Royal London’s in-house credit research and macro-economic views/. They will focus particularly on areas of the unrated and secured parts of the corporate bond market, combining these with ethical criteria that will be reviewed regularly.
Ethical investors who are looking for income from corporate bonds have a limited options compared with those looking for growth from equities, so this fund will widen choice. It is likely to appeal to ethical investors looking to access RLAM’s fixed income within an ethical context.
However, the fund’s ethical criteria may rule out investing in bonds from certain governments, sectors and companies, which could restrict the portfolio and make it more sensitive to price swings and income variations than other funds.
The fund could also face competition from established offerings in this field from Aegon, Rathbones and Standard Lif