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Green with envy

The winners and losers in the year that ethical funds went mainstream.

The fund management industry must be feeling pretty pleased with itself. The great and good, such as Anthony Bolton, may have been pondering the end of the bull run 12 months ago but it did not happen. Instead, the FTSE 100 rose above the 6,000 barrier.

By mid-December the best funds for the year were Neptune Russia, up by 49 per cent, Neptune China (39 per cent), Threadneedle pan-European smaller companies (38 per cent) and Aberdeen Property Share fund (38 per cent).

Confidence has spread and sales have picked up.

Mind you, not everyone will be popping the champagne corks. Several groups will be busily planning their Isa campaigns trying to persuade investors that their 2006 troubles or obstacles are behind them.

For starters, the workaholics at Fidelity have their work cut out. There has been a hint of desperation about Fidelity’s tactics – now promoting the global cause – but that is the Bolton factor for you. Its press team sent out no fewer than 34 press statements in the first weeks of this year’s Isa season and it will probably be forced to do the same this spring thanks to the imminent departure of the so-called “Quiet Assassin”. Next year will be Bolton’s swansong but investors are already ditching its flagship fund.

Meanwhile, former IFA favourite Credit Suisse will be embarking on a damage-limitation exercise following its annus horribilis. The cracks were beginning to appear before 2006 got under way but the departure of key personnel hit it hard.

Another group which had a more difficult year than it has been used to in the past is Artemis. Its funds have delivered superior returns consistently but last year it had fewer funds in the top quartile – with UK growth and UK smaller underperforming the average while the European, income and special situations funds were second-quartile performers. Certainly, not a reason to panic but worth keeping an eye on.

What of the winners in 2006? Well, you could not keep John Duffield’s New Star out of the headlines, and once again its sales have been strong – no small thanks to the relentless marketing of its property fund. M&G has also good reason to cheer. It is back in the limelight 75 years after launching the UK’s first-ever unit trust. Big funds such as international growth and dividend have turned round dismal performance and resurrected investors’ fortunes.

But perhaps 2006 will go down as the year that the once ridiculed ethical lobby became mainstream. It seemed as though the whole world went green. One minute David Cameron and his Shadow Cabinet had taken up the environmental baton by getting on their bikes, and the next bargain-bucket superstore Ikea was charging customers for its plastic bags to try to improve the environment.

Ethical IFAs have seen an increase in business from private investors and the total amount invested in ethical funds since the first was launched 21 years ago has broken through the £5bn barrier (it took 10 years to reach £1bn).

Performance from many ethical funds has rivalled non-ethical peers and suddenly green fund managers are not being seen as the veggie burger, sandal-wearing brigade. For the record, Aegon Ethical Equity, F&C Stewardship, Jupiter Ecology, Old Mutual Ethical, Norwich Union SF Absolute and Standard Life UK Ethical all outperformed their benchmark indices.

Fund groups have their good and bad years. Next year it will be the turn of some others to be dubbed a loser while those at the top will be targets for a fall. But green investing is here to stay and those that got in early will be rubbing their hands with glee.

Paul Farrow is money editor at the Sunday TelegraphMoney Marketing

50 Poland Street, London W1F 7AX Most Money Marketing readers are still here and doing well despite the various arrows of outrageous fortune.

There are still some issues about standards but overall we feel that IFAs are doing a good job and maintaining market share.

The FSA continues to identify problems with the quality of advice but we see as many problems with the disclosure regime. Menu or no, IDDs or no, we think better disclosure requires the FSA to get a handle on what it wants.

There are many uncertainties. The protection market has been rocked with another U-turn and simply cannot at times get the right product to the right person, no matter how many committees sit on high at the ABI.

We know that firms specialising in mortgages will face increasing pressure from the FSA although regulation is bedding in quite well.

Funds have delivered some excellent returns and there is more planning and asset allocation going on although there are worries about too much money going into the wrong asset class, say, property funds or corporate bonds, at the wrong time.

There is plenty of advice to give on pensions although U-turns do not help and this newspaper remains adamant that the NPSS is folly because of the risk of damage to existing schemes and the threat of blight. The Government remains cavalier.

The industry has also faced a number of massive U-turns on pensions simplification and an attack on trust planning. The allegation that the Government is merely catching some massive tax scam is too easy and all to often not true when the facts are reviewed. It should take its responsibilities more seriously.

The FSA does not really seem to know what treating customers fairly means for the retail market. You can bet your Christmas pudding many in the FSA have misgivings. The regulator is also obsessing about commission and churning but has once again mistated the problem so we may get another set of false solutions.

We also hope for a fairer settlement around who pays for the FSCS between IFAs and providers. It is not fair at the moment.

Still, advisers will no doubt be all right as usual. We wish you a very happy Christmas and a prosperous New Year.


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