Interactive Investor

ii ACE 40 investments:
Liontrust Sustainable Future Corporate Bond Fund

ii Ace 40
Asset GroupAsset Sub-GroupInvestment Category
Fixed IncomeSterling bondsCore

Why we recommend it

The fund has a long track record dating back to February 2001, but has been managed by Stuart Steven since he joined the Sustainable Investment team in 2013 and moved to Liontrust with the rest of the team in 2017 when the company acquired Alliance Trust Investments. However, Stuart Steven will retire from fund management and leave the business in September 2023, with the current co-managers absorbing his responsibilities.

The fund invests a minimum of 80% in investment grade corporate bonds that are sterling denominated or hedged back to sterling and aims to outperform the iBoxx GBP Corporate All Maturities Index. The team focus their efforts on finding high quality bond issuers by combining credit analysis with in-depth analysis of issuer specific factors, including ESG and macroeconomic analysis. Where relevant, the team also aim to identify companies whose core products or services are making a positive contribution to society or the environment. 

The fund has typically held around 20% in European issuers and 5% in U.S issuers and has included selected opportunities in high yield names. Government bonds are used to implement the fund’s overall duration positioning. Sector exposure is well diversified and typically within 5% of the index. At just under half of the portfolio currently, financials have historically been the largest sector exposure.

Under Steven’s tenure, the fund has delivered an annualised return of 2.60%, vs 2.72% from the index and 2.13% from the IA Corporate Bond peer group, placing 2nd quartile. Credit and sector positioning has added significant value, though this has been undermined by underweight duration position during the period of low government bond yields.

While Steven’s departure will be a loss for the sustainable team given his experience and tenure, he has worked closely with co-managers Kenny Watson, Aitken Ross, and Jack Willis in credit and rates strategy and decision-making. The three have close to a decade of average tenure on a team that has shown good stability, leaving them well placed to provide succession. We expect no change in process or approach. This handover will commence in April 2023. 

The fund’s returns are not compelling relative to the index or peers; however it has been able to keep pace over a long period, and for investors seeking a specific ESG mandate, this fund is good option due to a disciplined and integrated approach to sustainable investing, which uses a well-structured process crafted by a long-standing team.

The fund is reasonably priced: The ‘2’ income share class levies annual ongoing charges of 0.56%.

Ethical criteria

ii ACE sustainable style: Considers. This means the fund carefully considers an often wide range of ethical and/ or environmental, social and governance (ESG) issues or themes when balancing positive and negative factors.

Fund EcoMarket category: Sustainability Themed. This relates to funds that focus on sustainability related issues and opportunities as part of their investment strategy, often alongside ethical criteria. Their focus is often around longer term societal and environmental trends.

Information and data compiled March 2023.

Risk warnings

The information we provide in the ACE 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 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Review.

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 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 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 investments list.