ii ACE 40 review: Q1 2021

by Liberty Godfrey from interactive investor |

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Here’s how interactive investor’s selection of ethical funds performed in the first three months of the year.

Following challenging market conditions throughout 2020, the majority of ACE 40 active funds have performed in line with expectations during the quarter to the end of March 2021, with 50% seeing positive returns over the quarter and 25% within first and second quartile versus peers. 

Over five years, ACE 40 active funds have been proven to show strong returns, with all funds delivering positive returns and 82% in the first or second quartile versus peers. The majority of ACE 40 passive funds have also kept tight tracking errors over the period, and most investment trust premium/discounts have remained stable over the quarter. 

Top five ii ACE 40 funds in Q1 2021

  Performance      
Investment Q1 (%) 1 Year 3 Years 5 Years
Janus Henderson UK Responsible Fund 5.4 31.4 19.3 34.4
Unicorn UK Ethical Income Fund 5.1 34.1 6.7 -
iShares MSCI USA SRI ETF 4.4 44.4 73.9 -
Liontrust UK Ethical Fund 4.3 45.3 43 82.4
Impax Environmental Markets Trust 3.8 66.2 80.2 168.

Source: Morningstar, total returns in GBP, as at 31/3/21.

The strong performance of UK equities had a positive impact on ACE 40 rated funds within that category – three out of the top five strategies invest in British businesses. Top performers for the period included Janus Henderson UK Responsible Fund, returning 5.4% over the quarter, Unicorn UK Ethical Income Fund returning 5.1% and iShares MSCI USA SRI ETF returning 4.4%. Notably, Liontrust UK Ethical Fund featured in the top five performers, reflecting the rebound within UK markets over the quarter. 

In the five years ended March 2021, top performers included Baillie Gifford Global Stewardship Fund, returning 231%, iShares Global Clean Energy ETF returning 197% and Impax Environmental Markets Trust (LSE:IEM) returning 168%. 

Bottom five ii ACE 40 funds in Q1 2021

  Performance      
Investment Q1 (%) 1 Year 3 Years 5 Years
iShares Global Clean Energy ETF -15.2 125.4 168.5 197.2
Lyxor Green Bond ETF -6.7 -1.3 9.2 -
FP Foresight Global Rl Infras Fund -5.7 33.7 - -
VT Gravis Clean Energy Income Fund -3.7 38.5 79.4 -
RLBF II Royal London Ethical Bond Fund -2.7 9.5 14.9 30.7

Source: Morningstar, total returns in GBP, as at 31/3/21.

Among the underperformers (see table above), the clean energy sector struggled in Q1 as sentiment around conventional energy and resources improved significantly. As economies reopen and demand for material increases, especially in China, it is not surprising to see clean energy falling behind. However, over the long term, the case for the asset class remains strong as government spending and sustainable policies are likely to continue. 

As a result of this, over the quarter, bottom performers included iShares Global Clean Energy ETF at -15.2%, Lyxor Green Bond ETF (LSE:CLIM) returning -6.7% and FP Foresight Global Rl Infrastructure Fund returning -5.7%. VT Gravis Clean Energy Income Fund made the bottom five due to underperformance in the energy sector. 

Bottom performers over the past five years include Threadneedle UK Social Bond Fund returning 18.87% over five years, BMO Responsible UK Income Fund returning 26.61% and Royal London Ethical Bond Fund returning 31.28%.

Most-traded funds on the ii platform in Q1 2021

Most-bought Most-sold
Scottish Mortgage Scottish Mortgage
Alliance Trust Fundsmith Equity
Fundsmith Equity iShares Global Clean Energy ETF
City of London Baillie Gifford American
iShares Global Clean Energy ETF Edinburgh Worldwide

Most bought ACE 40 funds over the quarter included iShares Global Clean Energy ETF, Baillie Gifford Positive Change Fund, Impax Environmental Markets Trust, Royal London Sustainable World Fund and Rathbone Ethical Bond Fund

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

L&G Ethical Trust was removed from the ACE 40 list following a change of mandate toward a global approach. 

Rathbone Ethical Bond Fund was reclassified to the Adventurous category due to its return objectives and risk characteristics.

iShares Global Clean Energy ETF is currently under formal review due to an assessment of liquidity risks and concentration. 

Click here to read the rationale for changes to the ACE 40 list in Q1.

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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