Scottish Equitable's new UK socially responsible income fund is the UK's first ethical fund that invests exclusively in bonds.
Although classed as an ethical fund, Scottish Equitable prefers to call it a 'socially responsible' fund claiming it has a broader investment remit than the average ethical fund, which tends to have a large number of exclusions.
Like an ethical fund, it will not invest in companies that are involved in arms or tobacco manufacture or animal cruelty. However it does invest in Sterling-denominated investment grade corporate bonds of companies that meet certain criteria. These include environmental, humanitarian and corporate issues, community involvement and animal welfare.
This is an innovative idea that fills a gap in the market and could well appeal to clients looking to link a steady income with a more moral approach to investing. It is worth pointing out that this fund would exclude companies such as British Aerospace, which in 1999 made a pretax profit of £790 million, due to its links with the arms industry.
According to Standard & Poor's the Scottish Equitable A fund is ranked 150 out of 223 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to July 17, 2000.