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ii ACE 40 annual review

Ethical investing

ii ACE 40 Annual Review

October 2020

Following our annual review in October 2020 the ii ACE 30 has expanded to the ii ACE 40, with 14 new options added to the list and two funds being demoted. 

The new additions were made following a comprehensive review of the various ethical fund options available to retail investors. Compared to a year earlier, when our ii ACE 30 list was launched, there were a greater number of funds with sufficiently long enough track records to scrutinise and consider endorsing via our rated list of ethical investments.  

A total of 14 new options have been added, across various sectors. Meanwhile, Edentree European and AXA Ethical have exited the list as we have lost our conviction and no longer believe the funds stand out from the crowd. 

The ACE 40 aims to provide investors with a set of high-quality choices among the available universe of ethical funds, across a broad variety of markets and investment types.

What we look for 

Along with the regular performance monitoring of our rated investments, which includes both the general market and industry, and more strategy-specific events, the investment team at ii also perform an annual review of the whole list. The purpose of this exercise is to make sure our endorsed options are best in class and have the potential to consistently deliver against their respective targets. 

We explore the entire ethical universe and consider a wide range of quantitative and qualitative factors including but not limited to performance, risk and risk-adjusted metrics as well as value for money, the manager’s experience and the fund manager’s resource. . We also put strong focus on managers’ ESG philosophy, process and implementation. Those who manage to pass our requirement and receive a place on our ACE 40 list are then put into one of the following buckets, subject to approach:

  • Avoids - funds that exclude specific companies, sectors or business practices, such as tobacco.
  • Considers - strict environmental, social and governance (ESG) criteria, such as pollution levels, are taken into account.
  • Embraces - these focus on companies that deliver positive social and/or environmental outcomes, such as renewable energy.

Our aim is to select a range of investments, regardless of their structure, that capture a diverse group of investment styles and approaches. The investment styles and approaches include core vs adventurous, value vs growth, and large cap vs smaller companies. In terms of the investments our ACE 40 contains funds, investment trusts and exchange-traded funds (ETFs). 

But, there are deeper technicalities that could lead to building, retaining or losing conviction in a particular manager. While some of the investments may have similar aims, their approach of achieving these targets might be markedly different. This might result in holdings that offer greater diversification for investors.  

In addition, we also scrutinise fund managers that are consistently outperforming their peer group and it is our view that selecting investments which are at the top of their cycle would not necessarily deliver the same outcome in the future. We acknowledge the fact that different market environments have an impact on different strategies, an example of which is value that has been out of favour over the recent years. However, if the manager’s process remains robust and the strategy has been successful over the longer timeframe, we might be happy to retain our rating.

On the other hand, a good example of strategies that benefitted from the market conditions are quality growth strategies that have managed to produce strong returns over the past couple of years, in part due to their style bias. We recognise that it is extremely difficult to make this call and the risk of not getting every choice right is high. Nevertheless, for every ‘good’ manager that follows a period of underperformance with strong outperformance, there are others who have perhaps outlasted their original investment ideas.

Our robust criteria and assessment process, in which we have no conflicts of interest and focus on the best outcome for our clients, are designed to help us make the best decision we can every time.

Risk warnings

The information we provide in the ACE 40 investments list does not constitute a "personal recommendation". You should ensure that any investment decisions you make are suitable for your personal circumstances and that the ethical style of the investment reflects your personal beliefs.

Past performance of the underlying constituents is not a guarantee of future performance. Remember, the value of investments, and any income from them, can fall as well as rise so you could get back less than you invest.

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.

If you are unsure about the suitability of a particular investment or think that you need a personal recommendation, you should speak to a suitably qualified financial advisor.

Any changes to the ii ACE 40 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Outlook.

Details of all 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 hold shares in companies mentioned in the ii ACE 40 investments list, which could create a conflict of interest. Any member of staff intending to complete some 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 this ii ACE 40 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 list. This is to avoid personal interests conflicting with the interests of the recipients of this ii ACE 40 investments list.