Fund spotlight: Aegon Ethical Equity
An interactive investor analyst offers a view on one of our ACE 40 fund choices.
9th August 2021 11:12
by Liberty Godfrey from interactive investor
An interactive investor analyst offers a view on one of our ACE 40 fund choices.
The ACE 40 fund: listen to the Fund Spotlight extract from our Funds Fan podcast
The Aegon Ethical Equity fund aims to provide a combination of income and capital growth over the long term (which it defines as any seven-year period) through investing in a portfolio of UK shares that excludes companies that are engaged in unethical activities. It also integrates environmental, social and governance (ESG) considerations.
The fund, which is around £630 million in terms of size, uses the Investment Association’s (IA) UK All Companies sector average to measure its performance.
The investment process focuses on lesser-researched areas of the UK market, with mid-cap companies accounting for nearly half the fund.
How it invests ethically
The active approach of the fund screens out companies that engage in certain activities that can have a negative effect on the environment and society at large. The exclusions cover areas such as:Â nuclear power, gambling, alcohol and tobacco.
Aegon also conducts a survey on ethical and sustainable investing every two years that asks investors and advisers for feedback on its approach, with Aegon willing to make tweaks when necessary.Â
The fund is managed by highly experienced lead investment manager Audrey Ryan, who has more than 26 years’ experience in the industry, while support investment manager Elaine Morgan has over 33 years’ experience. The duo are further supported by the well-resourced wider team at Aegon.
- The Richard Hunter Interview: Audrey Ryan
- Want to invest ethically? ii’s ACE 40 list of ethical investments can help
What does it invest in?
The fund invests in a diverse portfolio of 70 holdings, with around 45% in UK mid-cap companies and around 35% in UK large-cap companies. The balance is comprised of some exposure to UK AIM and UK small-cap firms. Top industry exposure within the fund includes industrial goods and services (around 20%), technology (around 18%), financial services (around 9%) and insurance (around 8%).
Some of the largest holdings within the fund include RELX (LSE:REL) (3.6%), a multi-national information and analytics company;Â Diploma (LSE:DPLM) (3.4%), an international group of businesses supplying specialised technical products and services; and GB Group (LSE:GBG) (3.1%), an identity verification, location intelligence and fraud prevention company.
Some of the current ethical and sustainable themes within the portfolio include education, good health and well-being, environment, climate change and renewable energy, social housing and infrastructure, and software delivering solutions.
03/08/2020 - 02/08/2021 | 03/08/2019 - 02/08/2020 | 03/08/2018 - 02/08/2019 | 03/08/2017 - 02/08/2018 | 03/08/2016 - 02/08/2017 | |
Aegon Ethical Equity GBP B Acc | 33.17 | -1.78 | -3.83 | 4.90 | 10.96 |
IA UK All Companies | 33.06 | -13.12 | -1.01 | 6.46 | 17.39 |
FTSE AllSh TR GBP | 27.61 | -15.85 | 1.02 | 6.44 | 16.81 |
Source: Morningstar. Total return GBP
How has it performed?
The fund has delivered strong performance since the manager took over in 1999 in comparison to the IA UK All Companies sector average. Over five years, the fund (44.81%) has outperformed the IA UK All Companies sector average (41.22%), as well as the FTSE All-Share index (32.28%). Over a turbulent 2020, the fund was resilient in the downturn returning -0.82% against -6.17% for the IA UK All Companies sector average and -9.82% for the FTSE All-Share.
Over 2021 so far (to 2 August 2021), the fund is up 13.96% versus 13.11% for the IA UK All Companies sector average (13.11%), as well as the FTSE All-Share (11.68%).
Why do we recommend it?
Aegon Ethical Equity features on the ACE 40 list as a UK Equity Adventurous option. It also falls within the ACE ‘Avoids’ category, meaning that the fund screens out specific sectors considered to be unethical. The fund is managed by a highly experienced manager and team, and the investment process aims to generate outperformance at different stages of the economic cycle. The performance is driven primarily by stock selection rather than managers' taking a view on the wider macro backdrop. The ethical process adopted by the fund could allow investors to be mindful of the environment and society while gaining diversified exposure to the UK.
These articles are provided for information purposes only. Â Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. Â The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.