The fund invests globally in companies offering solutions to environmental problems, such as natural resource scarcity, water shortages and pollution.
Charlie Thomas assumed responsibility for the fund in September 2003; it generally performed well against the broader global market over his first four years of management. After the 2008 financial crisis ensued, the fund continued to perform well at times, but overall performance has since been mixed.
Since January 2008, the fund has measured its performance against the FTSE World Index and the FTSE ET100 Index, which comprises the 100 largest environmental technology companies globally. Over this time the fund has outperformed the FTSE ET100 Index, however, it has lagged its primary benchmark, the FTSE World Index, as well as the IA Global sector. Please remember past performance is no guide to future returns.
Past performance is not a guide to future returns. Source: Lipper IM to 02/02/2015
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Sentiment towards the environmental sector tends to ebb and flow, meaning the fund can go through periods of significant out- and underperformance. As the fund invests in a niche area of the market, it takes on additional risk and has tended to be more volatile than the average fund in the sector. In our view, the manager has not demonstrated strong enough stock picking ability to deliver returns significantly ahead of the wider global market for the level of risk taken.
Following a recent review of the fund, we no longer have conviction that the manager can outperform wider global markets, or our other favoured funds in this sector, over the long term. The fund is a relatively concentrated portfolio of around 70-80 holdings and it also has a significant bias towards higher risk small and medium-sized businesses. Both these characteristics could offer the manager more opportunity to add value through stock selection over the long-term; however, we do not feel this has been achieved, as supported by our analysis of the fund.
We rate Charlie Thomas as a sensible and experienced manager in this specialist area of the market and we feel this fund remains a reasonable choice for socially responsible investing on a global scale. That said we currently have greater conviction in a number of other funds in this sector which provide broader exposure to global stock markets. Our preferred funds in this global sector feature on the Wealth 150 of our favourite funds, across the major sectors.