Interactive Investor

ii ACE 40 performance review: Q2 2023

11th July 2023 13:24

by the interactive investor team from interactive investor

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Here’s how interactive investor’s sustainable funds performed in the three months to the end of June.

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There was close to a 50:50 split between ACE 40 funds showing positive and negative returns over the quarter. Those with average market-capitalisations at the larger end of the scale generally fared better.

For the second quarter in a row, the top performer on the ACE 40 investment ideas list was the Brown Advisory US Sustainable Growthfund with a 5.8% return. The fund benefited from the strength of the US equity market over the quarter and from its style biases, with large-cap growth being the top-performing area of the market. The fund’s managers incorporate sustainable investing traits into their long-term fundamental research process.

The UBS(Lux)FS MSCI World SRIis the next fund on the top performers' list for Q2, benefiting from the World Index’s high US exposure. The fund tracks the MSCI World SRI Low Carbon Select 5% Issuer Capped TR Index and this gives it a slight growth bias (lower exposure to energy, higher exposure to IT) versus mainstream indices which helped returns over the quarter.

The iShares MSCI USA SRI ETF (LSE:SUUS) invests in a sub-set of equities within the MSCI USA Index that demonstrate higher ESG ratings than other sector peers, as well as excluding companies involved in controversial businesses such as weapons, thermal coal, tobacco and oil sands. The fund showed positive returns but was slightly behind the S&P 500 index.

The next fund on the list is a departure, having no US equity exposure. Pacific Assets (LSE:PAC) is managed by Stewart Investors and follows their tried-and-tested approach to investing in Asia and emerging markets, which focuses on sustainable growth stocks with higher-quality elements, particularly regarding management teams. The positive market return of 3.8% was driven by exposure to India, which has been a feature of the fund for some time and stands at over 40%.

Rounding out the top five performers is Royal London Sustainable World. The fund has a reasonably high allocation to US equities and a growth investment style with a bias to large-caps and IT, and away from commodities, all of which have been beneficial over the quarter. The fund is an asset allocation product with a near 85% allocation to equities and the remainder in fixed income and cash.

At the bottom end of the list were three funds with exposure to alternative energy. This sector reflected the weakness seen in energy prices. The lowest returns were seen from the iShares Global Clean Energy ETF (LSE:INRG)which posted a negative 9.2%.The fund passively tracks the S&P Global Clean Energy Index, which is also the benchmark for VT Gravis Clean Energy Income. That fund has a focus on providing an income in region of 4.5% and primarily invests in closed-ended investment companies and yield companies that are involved in the provision, storage and consumption of clean energy. This can, at times, result in a more stable return profile than that obtained through investing in the S&P Global Clean Energy Index, but over Q1 and Q2 2023 the fund had very similar losses to the index.

The third fund with exposure to alternative energy is FP Foresight Global Real Infrastructure. The fund invests in companies that own or operate physical infrastructure or renewable energy assets globally and has significant exposure to the utilities (primarily renewables exposure) and real estate sectors. Both of these came under pressure during Q1 and Q2 2023, as uncertainty regarding demand and returns in a rising rate environment continued.

Impax Environmental Markets (LSE:IEM) suffered from NAV weakness and discount widening in equal measure to end up with a quarterly loss of 4.3%. The investable universe for the fund is defined by applying a screen on environmental, financial quality, and valuation criteria. Portfolio candidates must derive at least 50% of their sales from environmental activities, such as energy efficiency, water infrastructure, and pollution control. Attractive prospects are then vetted in a detailed and structured 10-step process. The portfolio tends to favour growth stocks in the mid-cap space and show sector bets that deviate significantly from broad global indexes. The underweight to the US, the mid-cap growth bias and overweights to the utilities and materials sectors, were headwinds over the quarter versus the mainstream MSCI ACWI Index. However, NAV returns were closer to those of the fund’s Ecology peer group average and have been good over the longer term.

The final fund on the underperformers' list is Impax Asian Environmental Markets with a negative 3.6% return. The fund is managed with a similar approach to Impax Environmental Markets and uses a custom benchmark comprising 80% MSCI AC Asia Pacific ex Japan and 20% MSCI AC Japan, which allows the managers to include exposure to Japan where companies form part of the industrialisation and energy efficiency initiatives for broader Asia. Returns in Asia were slightly negative over the quarter, dragged down by the weakness in Chinese equities. This fund, despite posting a negative return of 3.6% over the quarter, narrowly outperformed mainstream benchmarks, with its mid-cap exposure and the underweight to China being positives.  

Top five ACE 40 funds in Q2 2023

Group/Investment3 Month1 year3 Years5 Years
Brown Advisory US Sust Gr GBP B Inc5.7615.5431.76106.94
UBS(Lux)FS MSCI World SRI USD Adis GBP (LSE:UC44)4.4715.8734.2163.40
iShares MSCI USA SRI ETF USD Acc GBP (LSE:SUUS)4.1213.7749.1899.52
Pacific Assets Ord (LSE:PAC)3.7518.4841.0345.34
Royal London Sustainable World C Acc2.7912.0014.8653.10

Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.

Bottom five ACE 40 funds in Q2 2023

Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.

Top five ACE 40 funds over five years

Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.

Bottom five ACE 40 funds over five years

Group/Investment3 month1 year3 years5 years
Lyxor Green Bond (DR) ETF C EUR GBP (LSE:CLIM)-2.20-4.43-22.13-10.56
Liontrust Sust Fut Corp Bd 2 Grs Inc-3.57-4.65-16.06-6.53
CT UK Social Bond Z Grs Acc£ -2.54-3.68-10.47-4.12
RLBF II Royal London Ethical Bond M Inc-2.73-5.56-13.40-3.36
Aegon Ethical Equity GBP B Acc0.016.495.51-0.69

Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts. To 30/06/2023. Past performance is not a guide to future performance.

Most-bought ACE 40 funds in Q2 2023

Most-sold ACE 40 funds in Q2 2023

Changes to the ACE 40 list (under review/developments)

No changes.

ACE 40 videos in Q2

None in Q2.
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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.


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.

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