Interactive Investor

ii ACE 40 review: Q2 2021

9th July 2021 14:20

Liberty Godfrey from interactive investor

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

A broad recovery across global financial markets throughout the second quarter of 2021 was led by accelerating vaccine roll-out, and an easing of lockdown restrictions which has resulted in increased consumer spending.

Most of the active funds included in interactive investor’s ACE 40 list of ethical investments performed in line with expectations during the quarter to the end of June 2021. Some 97% saw positive returns over the quarter, 52% outperformed their respective benchmark, and 68% were within the first and second quartile versus peers.

Long-term numbers for the ACE 40 continue to remain strong and, over five years, ACE 40 active funds have shown strong returns, with all of them delivering positive returns - 78% outperformed their benchmark and 87% were in the first or second quartile versus peers. Most ACE 40 passive funds have also kept tight tracking errors over the quarter and longer term, and most investment trust premium/discounts have remained stable over the short and long term.

Top five ii ACE 40 funds in Q2 2021

  Performance (%)      
Investment Q2  1 Year 3 Years 5 Years
Baillie Gifford Positive Change  13.5 49.4 136.5 -
Brown Advisory US Sustainable Growth  13 24.7 95.8 -
iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES) 10.1 36.8 43.1 -
Pacific Assets (LSE:PAC) 10 31.3 35.3 75.6
Royal London Sustainable World 9.5 16.7 55.5 111.8

Source: Morningstar, total returns in GBP, as at 30/6/21.

Global recovery following vaccination roll-out and lockdown easing, especially in the US, has been a driver for top performers through the quarter. Asian and emerging markets have continued to struggle with the Covid situation, particularity India, yet markets have proven relatively resilient.

Top performers over the quarter included Baillie Gifford Positive Change fund, returning 13.5%, sustained by their concentrated, global portfolio of high-quality growth companies. Brown Advisory US Sustainable Growth fund returned 13%, with exposure to information technology and consumer discretionary sectors underpinning performance. The iShares MSCI EM SRI ETF (LSE:SUES) was up over 10% as was Pacific Assets (LSE:PAC) trust as the rebound in some Indian holdings supported performance. Royal London Sustainable World was close behind as its equity portion is exposed to US technology and UK healthcare.

Over five years to the end of June 2021, top performers included Baillie Gifford Global Stewardship fund, returning 238%, iShares Global Clean Energy ETF (LSE:INRG) returning 180%, Impax Environmental Markets (LSE:IEM) trust 170%, BMO Responsible Global Equity 125% and Royal London Sustainable World fund 112%.

Bottom five ii ACE 40 funds in Q2 2021

 

Performance (%)

Investment

Q2

1 Year

3 Years

5 Years

Syncona (LSE:SYNC)

-18.1

-15.6

-16.5

69.5

iShares Global Clean Energy ETF (LSE:INRG)

-2.7

68.3

162.9

180.3

Lyxor Green Bond (LSE:CLIM) 

0.7

-6.7

7.1

-

UBS MSCI Pacific SRI LSE:UB45)

0.7

11.0

19.9

51.2

Threadneedle UK Social Bond Fund 

0.7

1.9

9.1

15.5

Source: Morningstar, total returns in GBP, as at 30/6/21.

Fixed-income strategies were under pressure due to fears about inflation and potential rises in interest rates pushing prices down. This is evidenced in the quarter’s bottom performers.

Worst performers included Syncona (LSE:SYNC), down 18.1% following a recent narrowing of the premium, iShares Global Clean Energy ETF (LSE:INRG) down 2.7% closely in line with the market it is tracking. Lyxor Green Bond ETF (LSE:CLIM) added a modest 0.7% as it tracked the Solactive Green Bond index, UBS MSCI Pacific SRI LSE:UB45) and Threadneedle UK Social Bond Fund was both up by similar amounts, the latter crimped by pressure on bond markets over the period, although the manager has shifted into some more cyclical areas.

Over the last five years, bottom performers included Threadneedle UK Social Bond Fund returning 15.5%, Royal London Ethical Bond 29.7%, Liontrust Sustainable Future Corporate Bond fund 30.2%, Rathbone Ethical Bond 38.2% and Trojan Ethical Income fund 38.4%.

Most and least-bought ACE 40 funds in Q2 2021

Most-bought ACE 40 funds on the interactive investor platform last quarter included Baillie Gifford Positive Change, iShares Global Clean Energy ETF (LSE:INRG), Impax Environmental Markets (LSE:IEM), BMO Sustainable Universal MAP Growth and Royal London Sustainable World.

Least attractive to investors were Threadneedle UK Social Bond Fund, Unicorn UK Ethical Income, Trojan Ethical Income, Liontrust Sustainable Future Corporate Bond and PIMCO GIS Global Bond ESG fund. This is perhaps explained by markets recently favouring more cyclical areas, while fixed income strategies have been under pressure.

Most-traded funds on the ii platform in Q2 2021

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

iShares Global Clean Energy ETF (LSE:INRG) was put under review in March following S&P’s announcement it would enhance the methodology of the S&P Global Clean Energy Index. The idea was to reduce constituent concentration, ease liquidity limitations, and improve index replication. The changes made by S&P to its index on 19 April 2021 included expanding the number of constituents, lowering the criteria for inclusion, and changing the weighting methodology.

Following an extensive review of changes to its index methodology and assessment versus peers, the exchange-traded fund (ETF) was removed from formal review on 7 July 2021. We view the recent changes to the index as positive as they add diversification and improve the liquidity profile of the index portfolio.

Click here to read the rationale for changes to the ACE 40 list in Q2 and all other reviews.

ACE 40 videos

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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