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EdenTree Higher Income – fund changes

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

The investment policy and name of the EdenTree Higher Income Fund will change on 15 November 2021, subject to shareholder approval.

EdenTree has proposed to add a responsible and sustainable investment screen when choosing which companies the fund can invest in. While the fund already takes environmental, social and governance (ESG) factors into consideration, this change will formalise and enhance its ESG credentials and align them with other EdenTree funds.

The investment process will include 'negative screening' - excluding companies that the fund managers believe cause harm - as well as 'positive screening' to identify companies with strong responsible and sustainable corporate practices.

Negative screening will exclude companies with a material involvement in alcohol and tobacco production, weapon production, gambling, publication of violent or explicit materials, oppressive regimes, companies using animals to test cosmetic or household products, intensive farming, fossil fuel exploration and production, and high interest lending.

To reflect this addition to the process, EdenTree intends to change the fund’s name from the EdenTree Higher Income Fund to the EdenTree Responsible and Sustainable Managed Income Fund.

Why is EdenTree making this change?

As a firm EdenTree is focused on responsible and sustainable investing, and uses the same screening process on its other funds. It believes this change will benefit the Higher Income Fund by ensuring that ESG risks and opportunities are more explicitly taken into account, as sustainability takes on greater importance in the global economy. EdenTree believes that companies that are more aligned with these principles are more likely to perform well over the longer term.

Importantly, EdenTree expects this change to have no negative impact on the fund. The introduction of screening is not expected to alter the asset allocation - the mix of assets between shares, bonds and other types of investments - nor the level of income the fund generates.

Our view

We think this step makes sense given that responsible and sustainable investment is core to EdenTree’s investment philosophy. We don't anticipate any change to the fund's value-oriented, income-focused style of investing. Please note the fund's charges can be taken from capital. This increases the yield, but reduces the potential for capital growth.

Based on EdenTree's analysis, there will be limited changes to the fund. It estimates that around 11% of the fund by value will be substituted. Companies that don't pass the screens will be removed and replaced with new investments, while some existing investments will be increased. There could be an initial increase in exposure to smaller companies, but we expect the fund to keep its overall bias to larger companies. While smaller companies can offer superior growth potential, they are higher risk than larger firms. The fund can also invest in emerging markets which are higher risk.

EdenTree plans to phase the changes over a period of three months and expects incurred trading costs to be within the fund’s usual range.

We have analysed how lead fund manager Chris Hiorns has managed a similar strategy in the past - combining a more ESG-focused approach with a higher income objective - and we believe he can continue to deliver on the fund's objectives of higher income combined with capital growth.

Based on our view of these changes, the fund maintains its place on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential. As always, we will continue to monitor the situation and keep investors informed if our views change.

Annual percentage growth
Sep 16 -
Sep 17
Sep 17 -
Sep 18
Sep 18 -
Sep 19
Sep 19 -
Sep 20
Sep 20 -
Sep 21
EdenTree Higher Income 9.4% 4.1% 2.0% -11.7% 25.0%
IA Mixed Investment 40-85% Shares 9.4% 5.4% 4.3% -0.3% 16.9%

Past performance isn’t a guide to the future. Source: Lipper IM as of 30 September 2021

Find out more about EdenTree Higher Income including charges

View EdenTree Higher Income Key Information Document

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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