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Advisers in ethical dilemma

Credit Suisse Asset Management’s commitment to maintain the ethical fund of funds it has bought from Artemis has got a mixed response from specialist ethical advisers.

According to the Ethical Investment Research Service, there are around 60 ethical funds in the UK and some IFAs think this is too small to make a fund of funds worthwhile.

The Ethical Partnership director Gregory Braithwaite complains that a fund of funds’ approach will dilute the ethical criteria of each holding because the fund universe is not big enough for multi-managers to separate so-called lighter-green funds from those which are based on more stringent ethical criteria.

He says: “My job as an IFA is to match an investor’s ethical criteria with a fund. A lot of people investing in ethical funds like to specify the criteria that they think of as ethical. With a fund of funds, the ethical criteria of each underlying fund is diluted. This is fine if you have a looser view of what is ethical but if you wanted to follow a tighter view you could not have a fund of funds.”

Hargreaves Lansdown senior analyst Meera Patel says: “I have reservations about Credit Suisse’s capability to manage the ethical part of the portfolio following the merger. It is not an area that Gary Potter or Rob Burdett have a great deal of experience in. It will be interesting to see what happens to this fund.”

Other IFAs welcome CSAM’s decision to keep the fund open and think the takeover could signal an improvement in the fund’s previously unimpressive performance. Standard & Poor’s ranks the fund 250th out of 261 funds in the UK all companies sector over three years to March 28.

John Scott & Partners financial planning director Amanda Davidson says: “In my experience, most clients want a light-green touch. CSAM already runs the fellowship fund so it has a track record in the ethical market. I think the Artemis fund will be in good hands. As the performance has not been good, it gives Credit Suisse the chance to show ethical investment can pay.”

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