Troy Trojan Ethical Income: August 2025 fund update

• Blake Hutchins took over as manager of the fund at the end of September 2024, following Hugo Ure’s departure from Troy

• The manager looks for resilient and high-quality companies that can withstand times of stock market stress

• The fund doesn’t invest in companies with significant exposure to areas deemed unethical, such as tobacco and oil & gas

• This fund does not feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Troy Trojan Ethical Income fund aims to provide a rising income and the potential for capital growth, while minimising losses in a falling market. The fund’s ethical approach makes it different to many other income funds.

The manager doesn’t invest in companies with significant exposure to areas deemed unethical, such as tobacco and fossil fuels. Some of these areas are often well-represented in traditional income funds without an ethical tilt, so we think this fund could bring diversification to an income-focused portfolio. It could also be a conservative addition to a responsible investment portfolio built to provide income.

Manager

Blake Hutchins took over as the fund’s manager at the end of September 2024, following Hugo Ure’s departure from Troy. The fund was removed from the Wealth Shortlist at this point.

Hutchins joined Troy in 2019 from Investec Asset Management where he was lead manager on the UK Equity Income fund and co-manager on the Global Quality Equity Income Fund. Prior to that, Hutchins managed retail and institutional UK equity funds at Columbia Threadneedle.

Hutchins has learnt from a number of excellent fund managers over his career to hone his approach to investing in quality companies for income. Hutchins is supported by assistant fund manager Fergus McCorkell who joined the business in 2017. He also has the support of Troy’s wider investment team of 11. The team works collaboratively with a common approach to investment.

Process

Hutchins looks for high quality, resilient companies that can generate sustainable and growing cash flows. This supports dividends paid to shareholders and could help the business reinvest for future growth. Companies may be able to achieve this with a sustainable competitive advantage over peers – known as ‘economic moats’. These serve as barriers to entry which are likely to deter potential competitors from entering the industry. The companies the manager invests in are often market leaders and dominant within their field.

The fund tends to be concentrated with between 35 and 50 investments, which means each one can have a meaningful effect on performance, though this approach increases risk. There are currently 36 holdings in the fund.

A focus on high-quality companies and sheltering capital is consistent throughout Troy. It’s what makes their approach different to many others, meaning performance will also be different at times. This approach aims to provide a growing income and shield investors from the worst of market falls, though the fund may fail to keep pace with rapidly rising markets. Historically this has been the case, although this is no guarantee for the future.

Below is a more detailed list of the type of companies that the fund won’t invest in:

• Fossil fuels – Companies where more than 10% of their turnover comes from selling the extraction, refinement or generation of fossil fuels

• Tobacco - companies where more than 10% of their turnover comes from selling tobacco products

• Gambling - companies where more than 10% of their turnover comes from gambling

• High interest rate lending - companies where more than 10% of their turnover comes from high interest rate lending

• Alcohol - Tobacco - companies where more than 10% of their turnover comes from selling alcohol products

• Pornography - companies where more than 3% of their turnover comes from pornography or adult entertainment

• Armaments - companies where more than 10% of their turnover comes from selling strategic military supplies. This includes no exposure to companies involved in nuclear weapons manufacturing or with convention breaches relating to cluster munitions and anti-personnel mines

Recently, the manager’s reduced the fund’s investment in consumer goods business Reckitt Benckiser following some strong share price performance after the company delivered better than expected growth.

The fund can invest in smaller companies and make use of derivatives which adds risk.

Culture

Troy is a privately owned company, set up in 2000 by fund manager Sebastian Lyon with the backing of Lord Weinstock. We like that Troy's fund managers are dedicated to the same investment philosophy that was established two decades ago. The group has always been clear about the way its range of funds are managed, and the managers don't stray into overly complicated areas of investment markets. Wealth preservation is key, and each manager adheres to this mantra.

While Troy is home to a small, close-knit team of investors, the group has recruited more junior members over the years to boost resource and ensure the funds are left in good hands as and when more senior members retire. Despite the team’s growth we think Troy has remained a very collegiate unit with all members able to have input.

ESG Integration

Troy’s formally incorporated ESG (Environment, Social and Governance issues) into its investment processes for several years and came from a strong starting point. The firm’s always focused on the sustainability of returns and is a long-term investor. In recent years Troy’s investment team has formalised the way it incorporates ESG and the way it talks to investors about it. ESG is integrated using a materiality-based approach, meaning the managers focus on the issues they deem to be most material. They also have access to third party ESG data and research. How analysts and fund managers engage with ESG, and the overall quality of their research, is considered when calculating their incentivisation packages.

Engagement and voting are the responsibility of the investment team. All votes are discharged and usually cast in favour of management proposals unless the team believes investors’ interests are better represented by abstaining or voting against management. Their preferred course of action is to have dialogue with management ahead of casting a vote against. The firm provides a proxy voting portal where investors can see every vote exercised, although no rationales are provided. That said, Troy publishes a summary of its ‘significant’ votes in its annual ‘Engagement and Voting Disclosure’ report, along with rationales for voting both in favour and against proposals. The firm also produces a quarterly Responsible Investment report, which includes voting and engagement updates and case studies.

Cost

The fund has an annual ongoing charge of 1.02%, but through Hargreaves Lansdown you can secure an ongoing saving of 0.15%. This means you’ll pay a net ongoing charge of 0.87%. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies, except in a Junior ISA where no platform fee applies.

Please note the fund takes charges from capital, which could boost the income paid, but reduce the potential for capital growth.

Performance

Since Blake Hutchins took over from Hugo Ure in September 2024, the fund’s grown 4.30%*, underperforming the FTSE All Share index return of 13.01% over the same period. This is a short timeframe though and past performance isn’t a guide to future returns.

The fund’s relatively defensive style means we expect it to hold up better when stock markets fall sharply but lag a rapidly rising stock market. Stock markets have generally performed well since the fund’s launch in January 2016, so it hasn’t kept pace.

Given part of the fund invests overseas, we also expect the fund to perform differently to its UK-focused benchmark at times. The fund’s ethical exclusions will also cause performance to differ from the index. When the excluded areas are out of favour and their share prices fall, the fund could do well. When they perform well, the fund will miss out.

Over the last 12 months the fund has delivered a return of 5.81%, lagging the FTSE All Share index return of 12.06%. Our analysis suggests the fund’s investments in distribution business Bunzl and industrial company Rotork were among the key detractors from performance. Having less invested in Rolls Royce and British American Tobacco than the index also detracted from performance, as their share prices performed well over the year. On the other hand, investments in consumer goods business Reckitt Benckiser and retailer Next were among the better performers.

Given the additional challenge of managing a fund with ethical exclusions and the manager’s relatively defensive investment philosophy, we expect the fund to pay a lower yield than some other income funds. At the time of writing, the fund has a historical yield of 2.66%. Income isn’t guaranteed, and yields aren’t a reliable indicator of future income.