ii ACE 40 performance review: Q3 2024
Here’s how interactive investor’s sustainable funds performed in the three months to the end of September.
15th October 2024 09:27
Most funds on the ACE 40 showed positive returns over Q3 2024.
The best-performing fund was iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES)with a positive return of 6.2%. The ETF outperformed the mainstream MSCI EM index over the quarter, with attribution showing particular strength from the stocks held within the IT sector.
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A strong positive return of 5.69% was also seen from EdenTree Responsible & Sust European Equity. The fund is managed by the experienced Chris Hiorns, who has been at the helm since 2007. His approach is clearly value and contrarian. Ethical and liquidity screens are followed by valuation screens, with the aim of highlighting stocks that are currently out of favour, are more cyclical by nature, or are undergoing what are deemed to be temporary difficulties. Positive environmental, social, and governance screening is also employed. The fund outperformed peers and its mainstream benchmark over the quarter, with the value bias providing a tailwind.
The next two funds on the list, Liontrust UK Ethical and UBS ETF MSCI UK IMI SRI (LSE:UKSR), produced returns of 5.16% and 4.86% respectively. They both benefited from a lack of energy sector exposure and a bias down the market-cap scale.
Schroder Global Sust Value Equity is the final entry on the top five performers list, producing a return of 4.63%. The fund is an unusual product offering both sustainable characteristics and a clear value bias relative to mainstream benchmarks. There is a focus on companies deemed to be industry leaders or best in class versus peers in terms of sustainability, while the underlying stock selection methodology follows the established team process that seeks to identify contrarian, recovery ideas with strong financials. The value style and the bias down the market-cap scale were both positives over the quarter.
The underperformers list includes five funds which produced negative returns, although in the case of Pacific Assets Ord (LSE:PAC) this was due to a widening of the discount rather than NAV performance, with the latter showing growth of 1.51%, only slightly behind the peer group average.
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The largest negative returns were seen from Brown Advisory US Sustainble Growthand CT Responsible Global Equity with -3.58% and -2.03% respectively. Both funds have growth biases and were impacted by the underperformance of that style over the quarter. In the case of the former, the fund slightly underperformed against its Russell 1000 Growth index benchmark with some stock selection weakness in consumer discretionary and healthcare. For the CT fund, underperformance against the mainstream MSCI World Index reflects the growth style bias of the approach, but stock selection also detracted.
Stewart Investors Global Emerging Markets Sustainability showed a -0.99% return over the quarter which was behind the mainstream MSCI EM Index. The investment approach employed here focuses on sustainable growth stocks with higher-quality elements, particularly regarding management teams. A notable bias over recent years has been the underweight to China and this, plus stock selection in that country, is responsible for the majority of the weakness seen over the quarter.
Baillie Gifford Responsible Global Equity Income is the final fund on the underperformers list with a -0.46% return. The fund primarily invests in stocks able to provide sustainable growth and resilient dividends. It focuses on dividend growth stocks and therefore has less exposure to higher-yielding stocks in industries which are cyclical or lack structural drivers. This results in a portfolio that can at times show a yield only slightly higher than the mainstream MSCI All Country World (ACWI) benchmark and a slight growth bias. This is persistent and more obvious versus global equity income peers. Over the quarter, attribution versus MSCI ACWI shows some weakness in stock selection within industrials and consumer staples.
Top five ACE 40 funds in Q3 2024
| Group/Investment | 3 months | 1 year | 3 years | 5 years |
| iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES) | 6.20 | 10.67 | -6.00 | 14.72 |
| EdenTree Responsible & Sust European Equity | 5.69 | 14.55 | 25.99 | 53.57 |
| Liontrust UK Ethical 2 Net Acc | 5.16 | 20.02 | -16.93 | 6.56 |
| UBS ETF MSCI UK IMI SRI GBP A dis (LSE:UKSR) | 4.86 | 13.83 | 9.77 | 20.73 |
| Schroder Global Sust Val Eq Z Cap | 4.63 | 11.71 | 22.19 | 30.29 |
Source: Morningstar - Total Return for OE/Market Return for CE - (GBP) to 30/09/2024
Bottom five ACE 40 funds in Q3 2024
| Group/Investment | 3 months | 1 year | 3 years | 5 years |
| Pacific Assets Ord (LSE:PAC) | -0.79 | 2.16 | 6.87 | 33.26 |
| Stewart Inv Glbl EM Sustnby B GBP Acc | -0.99 | 7.12 | -4.03 | 15.92 |
| CT Responsible Global Equity 2 Acc | -2.03 | 20.54 | 9.19 | 56.31 |
| Brown Advisory US Sust Gr GBP B Inc | -3.58 | 21.44 | 21.06 | 99.55 |
| iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG) | -3.74 | -25.77 | -35.70 | 31.87 |
Source: Morningstar - Total Return for OE/Market Return for CE - (GBP) to 30/09/2024.
Top five ACE 40 funds over five years
| Group/Investment | 3 months | 1 year | 3 years | 5 years |
| Brown Advisory US Sust Gr GBP B Inc | -3.58 | 21.44 | 21.06 | 99.55 |
| iShares MSCI USA SRI ETF USD Acc GBP (LSE:SUUS) | 0.78 | 14.79 | 31.29 | 86.82 |
| Wellington Global Stewards GBP N Acc | 2.90 | 21.71 | 35.95 | 76.93 |
| UBS(Lux)FS MSCI World SRI USD Adis GBP (LSE:UC44) | 0.96 | 20.91 | 27.33 | 69.29 |
| Baillie Gifford Rspnb Glb Eq Inc B Acc | -0.46 | 12.35 | 22.66 | 62.04 |
Source: Morningstar - Total Return for OE/Market Return for CE - (GBP) to 30/09/2024.
Bottom five ACE 40 funds over five years
| Group/Investment | 3 months | 1 year | 3 years | 5 years |
| Rathbone Ethical Bond Fund I Acc | 3.15 | 13.12 | -4.29 | 5.93 |
| PIMCO GIS Global Bond ESG Instl GBPH Inc | 3.50 | 10.55 | -2.87 | 1.99 |
| CT UK Social Bond Z Grs Acc£ | 2.17 | 8.86 | -1.38 | 1.77 |
| Liontrust Sust Fut Corp Bd 2 Grs Inc | 3.07 | 14.33 | -5.90 | 0.27 |
| Amundi Glb Aggt Green Bd ETF Acc GBP (LSE:CLIM) | 1.30 | 4.51 | -13.29 | -16.82 |
Source: Morningstar - Total Return for OE/Market Return for CE - (GBP) to 30/09/2024.
Most-bought ACE 40 funds in Q3 2024
Most-sold ACE 40 funds in Q3 2024
Changes to the ACE 40 list (under review/developments)
- Removal of the Trojan Ethical Income Fund and the Royal London Ethical Bond Fund from the ACE40.
- Inclusion of the Royal London Sustainable Managed Growth Fund to the ACE40.
ACE 40 videos in Q3
Royal London Sustainable Leaders
The ACE 40 investments list is selected and managed by our independent research partner Morningstar and reviewed by our in-house investment experts to help narrow down the wide choice of available investment products. We believe it represents a set of high-quality choices, across different asset classes, regions, and investment types.
However, you should note that the selection of ACE 40 investments list is not a ‘personal recommendation’. This means we have not assessed your investment knowledge, your financial situation (including your ability to bear losses), your investment objectives, your risk tolerance, or your sustainability preferences.
You should ensure that any investment decisions you make are suitable for your personal circumstances, and if you are unsure about the suitability of a particular investment or think you need a personal recommendation, you should speak to a suitably qualified financial adviser.
The past performance of an investment is not a reliable indicator of future results, and ii does not guarantee or predict the future performance of the ACE 40 investments list as a whole or the constituent investments.
Risk Warning(s)
The value of your investments may go down as well as up. You may not get back all the money that you invest.
Investing in emerging markets involves different risks from developed markets, in many cases the risks are greater.
The value of international investments is affected by currency fluctuations which might reduce their value in sterling.
Disclosure(s)
All funds listed are the Accumulation version of the fund, where available, where any income generated within the fund is reinvested automatically. Income versions of these funds may also be available for investors looking for income generated to be paid directly into their account.
Annual performance can be found on the factsheet of each fund, trust or ETF. Simply click on the asset’s name and then the performance tab.
Any changes to the ACE 40 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Review.
Details of all ACE 40 recommendations issued by ii during the previous 12-month period can be found here.
ii adheres to a strict code of conduct. Members of ii staff may have holdings in one or more ACE 40 investments, which could create a conflict of interest. Any member of staff involved in the development of research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.
In addition, staff involved in the production of the ACE 40 investments list are subject to a personal account dealing restriction. This prevents them from placing a transaction in the specified instrument(s) for five working days before and after an investment is included or amended and made public within the ACE 40 investments list. This is to avoid personal interests conflicting with the interests of investors in the ACE 40 investments.