Sustainable Future Fund
Aim: Growth by investing in socially responsible companies via Norwich Union funds.
Minimum investment: Lump sum £500 monthly £50.
Investment split: Any proportion of corporate bond, UK growth, absolute growth, global growth, managed and European growth.
Isa link: Yes.
Pep transfers: Yes except absolute growth and global growth.
Charges: Initial 4 per cent, annual – corporate bond fund 1 per cent, all other funds 1.5 per cent.
Commission: Initial 3 per cent, renewal – corporate bond fund 0.25 per cent, all other funds 0.5 per cent.
Tel: 0845 3022557.
Luke Gibbon, Proprietor, Independent Personal Financial Management,
Peter Cox, Principal, James Tate,
Godfrey Bloom, Investment director, TBO Corporate Benefit Consultants,
John Wright, Proprietor, Investment Managament Services.
Suitability to market 7.0
Investment strategy 5.3
Past performance 7.0
Company's reputation 8.3
Product literature 6.8
The Norwich Union Sustainable Future fund is an open-ended investment company that consists of six Norwich Union sub-funds. These are corporate bond, UK growth, absolute growth, global growth, managed and European growth. It aims to deliver long-term growth by investing in socially responsible companies that are involved in water management, renewable energy, advanced communications and education.
Assessing the fund's suitability to the market, Gibbon says: “The sustainable futures fund offers a range of investment opportunities from an income orientated corporate bond to a global growth fund. All the funds follow a socially responsible investment policy.”
Wright says: “It is another twist on the green fund idea. It will be considered alongside similar funds and with a name like Norwich Union, it will be well accepted.”
Cox says: “It is an area attracting increasing interest. The more funds on offer to investors, the better.” Bloom thinks Norwich Union is another big player joining an increasingly recognised sector.
Turning to the type of client that the fund is suitable for, Wright says: “It would suit conscientious, young and far-sighted people together with those following themed investments.” Bloom thinks it is suitable for investors who want to make money with a clear conscience.
Gibbon says: “While in theory it would be appropriate for any client who wants fixed interest or equity investment, it is geared more to those clients seeking ethical investments. Clearly, it is also designed to attract pension scheme investments as trustees now have to declare their approach to social and environmental issues.”
Cox thinks it is appropriate for anyone who has firm beliefs in its socially responsible objectives and for clients who feel the sub funds have a mixed portfolio.
Moving onto the marketing opportunities the fund is likely to provide, Cox believes there are no specific opportunities. Bloom disagrees. He says: “There will be plenty of opportunities. It is a growing sector for people with more than £50,000 to invest.”
Wright says: “Many IFAs have social contact with groups who should go for this type of fund.” He mentions church and voluntary service groups as he thinks it is likely they would both be interested in green investments.
Identifying the main useful features and strong points of the fund, Gibbon points to the flexibility. He says: “Where this fund potentially differs from other ethical funds is by having a range of sub funds. It may be suitable for clients who, for example, want capital growth now but are likely to need income in the future. The sub funds will easily allow the investment focus to be altered.”
Cox agrees and adds: “The range of sub funds cover the specific areas of investor's interest, which is good and offers diversification.”
Wright says: “It is not clear if the fund is available within a pension, Isa or other vehicle. I assume it will be available as a pension fund and will therefore be beneficial as a selling tool.”
Bloom is not impressed and struggles to find any strong points. He says: “It is a fashionable product, but fashion is sometimes a fickle playmate.”
Analysing the fund's investment strategy, Wright says: “It is another attempt at themed investments. For example, It is concerned with the ageing population and the question of clean water. This approach often works very well over the long term.”
Gibbon says: “By their definition, ethical funds are limiting their investment choice which can reflect in the performance against new ethical funds. This does not mean the returns will be poor, but they could be lower than other funds. This is not a problem as long as the client accepts there could be a price for principle.”
Cox says: “The research approach appears very good. However, it is consistent performance that attracts investors at the end of the day.”
Bloom says: “The fund's investment strategy is deeply flawed. It is based on what the managers and marketing people would like to happen in the next 20 to 30 years.”
Identifying the drawbacks of the fund, Bloom says: “The grading system precludes whole sectors of the equity markets.” He is not impressed by the socially responsible criteria of the fund.
Wright says: “This does not have a broad enough range of investments, as in a Norwich equity fund. This will limit its performance in years when, for example, telecoms does well.”
Cox says: “The nature of this type of fund can result in increased management and research costs. This could be a disadvantage if the current trend for cheapness continues.”
Assessing the company's reputation, the panel is broadly in agreement. Gibbon says: “Norwich Union has a good reputation as an insurer.” Wright says: “Its reputation is very good from the public's perspective. But its administration is in a mess.”
Bloom thinks it has a good reputation and Cox says: “It has quite a good investment track record and a well known name, which could be a distinct advantage.”
Moving onto Norwich Union's past performance, Gibbon says: “As a general rule, I do not feel that insurance companies have as good an investment record as investment houses. Recently, Norwich Union's equity record has improved. However, I believe the fund management team previously ran NPI Global Care fund, so it is that fund that should be appraised.”
Bloom thinks Norwich Union's past performance is moderate and Cox is impressed with its performance in the UK, Europe and fixed interest sectors.
Wright says: “Norwich Union is on a par with other insurance and pension fund managers, but it is not among the leading unit trust groups.”
The panel assess which companies are likely to provide the main competition. Gibbon mentions other ethical funds. Wright mentions ecology funds, particularly the Jupiter ecology fund. Bloom is dismissive of the “so-called ethical funds” that he feels will compete with the Norwich Union fund.
Cox says: “Probably ethical funds and any other fund with clear sector performance.”
Moving onto the charges, Bloom, Cox and Wright think the charges are in line with the market average. Gibbon offers a different view. He says: “The four per cent initial charge is lower than many funds. However, for investments via an Isa, discounts can often be obtained. Norwich Union's lack of a discount makes the Isa charges appear high. The annual management charge is typical for international funds, but slightly high for UK investments.”
Discussing the commission, the panel agree that it is fair and reasonable.
The panel examine the product literature and put forward opposing views. Bloom thinks it is good and Wright feels it is very good. Cox says: “It is thorough and well explained.”
Once again, Gibbon is critical. He says: “I found the literature repetitive.”