Aim: Growth and income by investing globally in an ethically screened portfolio of companies
Minimum investment: Lump sum £7,000
Investment split: 46% equities, 15.79% property, 26.81% fixed interest, 11.39% cash
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7426 5984
King & Shaxson’s ethical balanced income fund is pitched as an alternative to higher risk equity-based ethical funds and corporate bond ethical funds, which have lower returns. It invests in a broad spread of assets including shares, fixed interest, commercial property and cash, so there is less reliance on one asset class.
The Ethical Partnership director and ethical investment specialist Jeremy Newbegin points out that King & Shaxson is new to IFAs, while advisers tend to invest with companies they know. “King & Shaxson will therefore struggle to build up funds under management and performance will be the key to its early success. It will be important that King & Shaxson makes this fund launch profitable to ensure longevity,” he says.
Looking at the ways in which the fund is beneficial to IFAs and their clients, Newbegin says: “There is a distinct lack of ethical “income” or “balanced” funds so this new fund is very welcome to IFAs like myself who specialise in the ethical and socially responsible investment market place, especially so because it is the first ethical income fund, with a lower to medium risk investment risk philosophy.”
With an anticipated gross yield of 4.7 per cent, Newbegin thinks the fund’s income objective is realistic and that the growth prospects are good in the long term. He also points out that the exclusion criteria is not onerous, but is reasonably strict, so the fund will be attractive to many of his clients who are motivated by avoidance criteria.
“I like the asset allocation of the fund – 40 per cent equities, 38 per cent fixed interest, and 20 per cent property – the latter especially is hard if not impossible to find in an ethical fund and will help maintain the yield capabilities,” says Newbegin.
He also likes the fact that the fund will invest in equities that fulfil a clear environmental purpose. “I believe that it is funds with a clear focus on the environment that will perform well in the coming years,” he says.
The fund’s exposure to commodities, especially forestry, also goes down well with Newbegin. However, there are aspects of the fund that attract criticism from Newbegin.
“Although I am pleased that there is exposure to commercial property it is arguable whether the Standard Life property investment trust or Wichford can be identified as being ethical.
“I suppose that is the point of having “best of sector” and it is at least more “ethical” than other similar funds. This is therefore a compromise and the fund will not suit all my clients, especially those with strict ethical preferences,” he says.
In Newbegin’s view, the charges are also a bit high, although they are normal for the industry. He adds that he is also disappointed that there is not a greater exposure to international equities – the weighting is only 4 per cent – but can understand why this is.
In terms of competition, he suggests Henderson global care managed, Henderson global care income, Norwich Union SF managed, F&C stewardship income and Jupiter environmental income. However, he concedes that these funds may not be directly comparable.
Newbegin concludes: “If King & Shaxson had offered monthly income from this fund it would have made the fund really stand out, providing a huge benefit to clients seeking income. The fact that the fund pays half-yearly income is perhaps a negative.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average