Sustainable Leaders Trust
A UK growth fund focusing on the core themes of the environment, human welfare and sustainability to generate superior investment returns.
Introduction to sustainabilityDownload product factsheet
"This Fund demonstrates that responsible investing and high performance can go hand-in-hand. The increasing importance of the environment, human welfare and sustainability in society means the Fund is well-positioned to remain a consistent long-term performer."
- Performance
- Why recommend this fund to your clients?
- Fund aims
- A closer look at the Fund
- What does the Fund invest in?
- Fund suitability
- Investment philosophy
- Top 10 holdings
- 2 stock profiles
- Sector allocation
- Fund manager strategy and outlook
- Investment process overview
- Fund manager and investment team
- Fund facts
- How to invest
Performance (to 30/06/10)
Percentage Growth to latest quarter end, total return, bid to bid price, Net income re-invested. (Source: Lipper) The Fund moved from Global Growth to UK All Companies Sector on 7th May 2004.
Cumulative performance (% change to 30/06/10)
| 1 year | 3 years | 5 years | Since launch (29/05/90)* | |
|---|---|---|---|---|
| Fund | 16.3 | -16.9 | 26.8 | 260.3 |
| Sector median | 19.0 | -17.5 | 14.0 | – |
| Quartile Rank | 4th | 2nd | 3rd | – |
Percentage Growth to latest quarter end, total return, bid to bid price, Net income reinvested.
Source: Lipper
*Measured against UK All Companies sector. The Fund moved from Global Growth to UK All Companies sector on 7th May 2004.
Discrete performance (% change to 30/06/10)
| 30/06/09 - 30/06/10 |
30/06/08 - 30/06/09 |
29/06/07 - 30/06/08 |
30/06/06 - 29/06/07 |
30/06/05 - 30/06/06 |
|
|---|---|---|---|---|---|
| Fund | 16.3 | -18.0 | -13.0 | 25.3 | 21.8 |
| Sector | 19.0 | -20.1 | -13.3 | 17.1 | 18.5 |
Percentage Growth for discrete one-year periods, total return, bid to bid price, Net income reinvested.
Source: Lipper
Measured against UK All Companies sector.
Why recommend this fund to your clients?
- Holds OBSR ‘A’ rating and Morningstar’s ‘Superior’ Qualitative Rating.
- Mike Fox was Citywire’s ‘UK Growth Fund Manager of the Year 2007’.
- Invests in the three core themes of the environment, human welfare and sustainability, thereby making a positive contribution to society.
- Aims to outperform the UK FTSE All-Share.
A closer look at the Fund
Fund aims
The Fund invests in companies with products or services that benefit the core themes of environmental improvement, human welfare and sustainability. Companies leading their industries in environmental, social and governance (ESG) performance, as assessed by our ESG analysts, are also included in the investable universe, thereby creating a portfolio of investments that make a positive contribution to society.
The Fund aims to provide first quartile performance over a rolling three-year period measured against the UK All Companies sector. The Fund also aims to outperform the FTSE All-Share Index.
[back to top]What does the Fund invest in?
The Fund invests predominantly in UK equities. Given the Fund’s aim, sectors such as utilities, healthcare, telecoms and support services are prominent. The Fund excludes tobacco and armament manufacturers, nuclear power generators and companies conducting animal testing for the purpose of developing cosmetic and household goods. Companies not making strenuous efforts to reduce their environmental impact are also excluded.
The investment universe consists of around 170 companies evenly split between small, medium and large capitalisation companies. Approximately 50% of the FTSE100 by market capitalisation currently meets the Fund’s criteria. Oil & gas and mining, whose combined weighting is approximately 27% of the UK FTSE All-Share, are the largest excluded sectors.
Fund suitability
The Fund may be suitable for investors looking for:
- long-term growth through investing in high quality UK companies
- investments in companies that demonstrate responsible business practices, and avoiding companies that are involved in armaments, tobacco, nuclear power generation or animal testing for the development of cosmetics and household goods
- the opportunity to ensure that their money helps to make a positive contribution to society through improving human welfare and the environment.
Investment philosophy
Our investment philosophy and style is best described as follows:
- Focused - The portfolio will typically have between 40-50 holdings and over 45% of assets in the top 10 holdings.
- Long-term - Investment holding periods of three to four years.
- Stockpicking - We construct portfolios on a bottom up basis.
- Responsible - Embedded environmental, social and governance (ESG) analysis provides a broader perspective and represents the views of our customers in the investment process.
Our investment approach is structured to consider companies at three levels to identify stocks which are mis-priced.
- Investment Themes - The increasingly short-term nature of the investment industry, evidenced by declining stock holding periods, results in long-term opportunities being overlooked. We have therefore adopted a long-term investment philosophy and evaluate the effect of long-term investment themes.
- Industry trends - The increasingly narrow focus of most investors has resulted in us broadening the scope of inputs beyond traditional investment research to identify wider industry trends or linkages between industries.
- Company specific - We believe that the market inefficiently discounts company specific events such as management change. Therefore we devote a large amount of analytical resource to changing company situations.
Top 10 holdings
(as at 30/06/10)
| % of Fund | |
|---|---|
| Smiths Group | 5.3 |
| Rotork | 4.4 |
| AstraZeneca | 4.4 |
| Victrex | 4 |
| Lloyds Banking Group | 3.8 |
| Aggreko | 3.7 |
| HSBC Holdings | 3.4 |
| Scottish & Southern Energy | 3.2 |
| Barclays Bank | 3.1 |
| Standard Chartered | 3.1 |
| Total | 38.4 |
2 Stock profiles
1. Scottish & Southern Energy (SSE)
SSE is the largest developer of renewable energy in the UK. It is currently building the largest offshore wind farm in Europe and is playing a leading role in helping the UK Government meet its carbon reduction targets. In doing this SSE should continue to grow its profits for many years to come.
2. RPS Group
RPS is one of the largest environmental consultancies in the UK. It specialises in town planning and renewable energy, ensuring buildings are constructed in the most environmentally efficient manner and that the UK meets its commitment to the build out of wind power. It is also a leading health and safety consultant.
[back to top]Sector allocation
Fund manager strategy and outlook
Over the last three months the UK equity market has fallen by 11.8%. Markets have continued to remain concerned that recent softness in a number of US economic data points, coupled with the public debt problems in Europe, may result in the global economy experiencing a double dip recession. We believe that these concerns are overplayed and the emergence of Asian economies should result in a sustainable economic recovery, all be it somewhat muted.
Our strategy is biased towards those companies with emerging market exposure, given their superior long-term growth prospects. This is coupled with a number of businesses with exposure to western economies who command strong market presence and are well positioned to perform in challenging markets.
During the quarter portfolio activity was minimal. Existing holdings in Lloyds and Royal Bank of Scotland were increased. Whilst the sector has rightly been heavily criticised for poor lending standards and Governance, a responsible banking industry is fundamental to social and economic wellbeing. We believe that actions taken both by regulators and by company management teams will restore trust in the sector. This, combined with an improving economic environment, should result in good share price performance.
Over three years the Trust is ranked in the second quartile and has outperformed the median of the sector by 0.6%. The Fund is positioned toward companies who, either through the products or services they produce or in the way they conduct themselves, contribute to the objective of a sustainable world.
[back to top]Investment process overview
1. Initial screening
- FTSE 350 plus selected small cap and AIM companies are assessed against funds aims, noted above
- an external advisory committee decides on the approved list of investments.
2. Security selection
- stocks are assessed against a number of key criteria such as valuation, management quality, and environmental, social and governance performance
- valuations are predominantly cash-based.
3. Portfolio construction
- stock positions are determined primarily by the risk/reward potential of a particular investment
- the portfolio is focused in nature, with 40-50 holdings.
4. Risk management
- risk is assessed prior to investment in the research process by considering the potential for loss of capital
- risk is then assessed across the portfolio by considering sector and factor risk (for example interest rate sensitivity)
- weekly risk and performance monitoring occurs with independent review by the Head of Equities.
Fund manager and investment team
| Years in industry | 10 |
| Years at The Co-operative Investments | 10 |
Mike Fox has been managing the Sustainable Leaders Trust since November 2003; he won Citywire's UK Growth Fund Manager of the Year in 2007. Mike was a member of the team managing the CIS Pension Fund prior to 2003, and previously trained as a chartered accountant after obtaining a Masters Degree in Mathematics from Leeds University.
Mike draws on the expertise of over 50 investment professionals at The Co-operative Asset Management, all based in Manchester, including:
- equities, fixed income and ESG (environmental, social and governance) research analysts dedicated to researching UK companies
- fund managers focused on stock selection and constructing diversified portfolios which balance performance with risk and volatility
- quantitative, operations and other experts supporting the investment process
- risk analysts, responsible for ensuring appropriate risk is taken within the portfolio.
Fund facts
| Manager name & location | Mike Fox, Manchester |
| Fund type | Unit trust |
| Launch date | 29 May 1990 |
| Index/benchmark | FTSE All-Share |
| Sector | UK All Companies |
| No. of stocks (as at 30/06/10) |
46 |
| Fund size (as at 30/06/10) |
£257 million |
| Distribution dates | January, July |
| Lipper ID | 60009198 |
| Sedol code | 161510 |
| PTR (as at 30/06/10) | 78.78% |
| TER (as at 30/06/10) | 1.53% |
How to invest
The Sustainable Leaders Trust is available to investment professionals through a number of platforms including Cofunds, Fidelity and Hargreaves Lansdown:
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