Fund spotlight: Royal London Sustainable Leaders Trust

by Dzmitry Lipski from interactive investor |

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Our head of funds research offers a view on one of our ACE 40 fund picks.

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Extract taken from the latest Funds Fan podcast

Royal London Sustainable Leaders Trust is a member of interactive investor’s ACE 40 list as a UK Equity Core recommendation. The fund aims to provide capital growth from a diverse portfolio of equities, mainly in the UK and in any economic sector. Investment will be limited to companies that are likely to benefit from measures taken to improve the environment, human welfare and quality of life.

The fund is managed by highly experienced investor Mike Fox, who is head of sustainable investments at Royal London and has managed the fund since its launch in 2003. The manager and his team combine both negative and positive screenings as part of the process and will not invest in companies that derive more than 10% of their revenue from the likes of military applications, animal fur products, pornography and gambling.

What does it invest in?

The fund has a relatively concentrated portfolio of around 40 stocks. At sector level, the largest allocations are to industrials, financials, healthcare and technology. Among its top holdings are the London Stock Exchange (LSE:LSE), AstraZeneca (LSE:AZN) and Experian (LSE:EXPN).

Why we like this fund’s ethical approach

The sustainable investing sector is one that has grown in size and importance in recent years, partly because of the broader climate change debates, but also because evidence points to companies that adhere more closely to environmental, social and governance (ESG) considerations producing better long-term returns.

The team behind the Royal London Sustainable Leaders Trust is very committed to ESG investing and have consistently outperformed the market and other funds in the sector over both the short and longer term, with lower risk despite a relatively limited pool of stocks.

Performance

The fund’s long-term performance, in terms of both total returns and risk-adjusted returns, stands out from the crowd.

This year (to the end of October), the fund returned 2.3% versus a loss of 10.3% for the FTSE All-Share index, which is its benchmark.

In addition, the fund sits in the Investment Association’s UK All Companies sector, and has outperformed the sector average over the past three and five years. According to FE Analytics, over three years (up to 16 December) the fund has returned 32% versus 3.9% for the sector average, while over five years the fund is up 68% versus 30% for the sector average.

Fund/Index/Category 01/12/2019 - 30/11/2020 01/12/2018 - 30/11/2019 01/12/2017 - 30/11/2018 01/12/2016 - 30/11/2017 01/12/2015 - 30/11/2016
Royal London Sustainable Leaders Trust 2.32 22.52 2.44 18.17 4.99
FTSE All Share Index -10.29 11.01 -1.46 13.35 9.77
Morningstar UK Large-Cap Equity Category -9.32 11.06 -2.82 12.59 7.63

Source: Morningstar Direct. Total returns in GBP.

The ii view

Royal London Sustainable Leaders Trust is a compelling offering run by Royal London Sustainable Investments team of experts. It should appeal to someone who is looking for active core UK equity exposure with an ethical overlay.  

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. 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.

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