Ethical and Green Investment market first half 2012 - Overview
It has been a difficult time for environmental and thematic funds. Poor performance relative to global equities has seen further deterioration in Assets Under Management. In contrast UK ethically screened funds have enjoyed market leading performance.
Other news has been dominated by the move on 2nd August of the Aviva ethical team together with the Sustainable Future range of funds and the Aviva UK Ethical fund to Alliance Trust.
In July Henderson Industries of the Future fund was merged into the Henderson Global Care Growth fund and despite Henderson’s stated intention of closing the Henderson Global Care Income fund they have so far been unable to do so as a result of a single unit holder. During this period Tim Dieppe moved from Henderson and is now the fund manager of the IM WHEB Sustainability Fund.
In overview Assets Under Management(AUM) in the Worldwise Investor fund range has remained stable, but there have been significant shifts within Investment Houses, with those who have concentrated on thematic funds generally suffering - Pictet being the one exception.
The drivers behind the Worldwise Investor themed funds include population growth, the rise of the emerging market middle class, climate change and the dwindling supply of key natural resources. We expect investment returns and funds under management in this market to increase in the future as investors start to look beyond the financial crisis and towards the greater resource and environmental challenge that the global community faces.
All the funds on Worldwise Investor are available to UK investors but the AUM figures include non UK investors. This has a significant impact on the thematic Investment Houses who have a strong European presence.
The Worldwise Investor Fund Market
- Ethically screened funds have retained and grown AUM in the first half of 2012.
- The thematic Investment Houses have seen significant falls in AUM in the first half of the year, which do not align with performance. DWS Invest, SAM, Allianz and Blackrock have seen falls in AUM of around 20%, which looks to be mainly coming from investor withdrawals. Pictet, despite also being a thematic Investment House, have kept AUM stable and remain by far the biggest Investment House on Worldwise Investor.
- Henderson Global Investors has seen a decrease in AUM of -4% or -£21m which will reflect in part the fall out after making their entire fund management team redundant at the end of 2011.
- Similarly First State have seen AUM increase 26%, or £93m, despite soft closing the funds at the end of 2011.
- After the half year, on 2nd August Aviva announced that all the ethically screened money with the fund management team would be moving to Alliance Trust. Thus Alliance Trust will become the 2nd largest ethical manager of money in the UK and the 4th largest Investment House on Worldwise Investor.
- Amongst the smaller players Cheviot have made a notable increase in AUM with growth in their Climate Assets Fund over the period of 33%, or £5m taking their AUM to £19m.
- At a fund level while Clean Energy funds have done poorly it has been a good area to have fund management. The ishares Clean Energy fund is down -52% in the year compared to the Pictet Clean Energy which is down -22%.
The ethically screened fund market
- Cautious funds have increased assets under management. The 59% increase in Royal London’s ethical bond fund has been a notable success. The rebranding of the AXA Ethical fund to the AXA Ethical Distribution fund in November 2008 also seems to be working.
- Sarasin have seen falls in AUM in their ethically screened funds, but this is as a result of our classification of their Water fund as an ethical fund because it uniquely has a number of ethical screens. The Sarasin Sustainable Water fund lost -16% of its assets falling by £48m. This fall in AUM in a Water fund is not unique and has been seen by other Investment Houses in Europe.
- The other notable fall in assets under management bucking the trend in the ethical sector is at Jupiter with a -5% fall, similar to Henderson Global Investors. The Jupiter Ecology fund has seen assets fall by -£21m or -6% explaining the whole fall. In the first 6 months of the year the fund returned -0.72%. At best this fund does not appear to be attracting new monies.
Performance analysis
See full Worldwise Investor report for the full version of analysis of this information. However, the roundup looks like this:-
- Environmental funds have in general underperformed world markets over the last year.
- Clean Energy continues to be the ‘dog’ of the thematic universe, with water continuing to be the area which shines.We can see that despite some recent positive performance money has been flowing out of Agriculture.
- Environmental and Clean Energy funds have seen poor performance, combined with outflows in AUM.The Ethically screened fund universe has performed in line with conventional markets.
- Assets Under Management have grown in the period at a faster rate than performance suggesting that even the equity funds have seen new monies.
- The following chart details the best performing funds on Worldwise Investor over the last three years. For comparison purposes we have also shown the L&G FTSE 100 tracker to provide a comparison point with the conventional UK market.
Top funds over 3 years
One point to note is that a number of UK ethically screened funds in the three years to 30th June 2012 have significantly outperformed the FTSE 100.
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