Ethical funds hold their own in tough investment conditions

September 12, 2008 | posted by Pam Atherton in Investments | comments (2)

Investors who invest in ethical funds have seen negative performance over the last year, but 10 of them  managed to outperform the average mainstream unit trust performance.

The last 12 months have been difficult for all fund managers, but particularly so for those running  ethical money, due to the constraints as to where they can invest. Clearly, funds which are mandated to avoid oil and commodity-related companies have suffered particularly badly due to the boom in these sectors. Even the top performing ethical fund registered a negative return.

But ethical funds nowadays span various asset classes, including the bond, global equities and UK All Company sectors, so they can be benchmarked both against other ethical funds and against the sector in which they invest.

For instance, the top performing ethical fund over the 12 months to July 2008 was the Royal London Ethical bond fund, which returned -4.4 per cent, outperforming other ethical funds, but not the average performance for the UK bond sector which returned -2.8 per cent.
Elsewhere, the Aberdeen Ethical World fund returned -9.9 per cent over the last year - not a great return you might think - but it was actually better than the average global growth fund which made only -14.2 per cent. 

And the F&C Ethical 2 Income Fund also beat the average UK All company sector average of - 19.6 per cent, with a return of -17.5 per cent.

In fact, over the last 12 months, 10 ethical funds have beaten the average mainstream unit trust performance of -13.6 per cent. 

But pity the poor ethical fund manager. With the downturn in the world economy, ethical funds managers will continue to face challening investment conditions as ‘booze, bombs and ‘baccy’ stocks, which traditionally perform well during recessions, will be off limits.

Source for all data: Money Management magazine, August 2008 issue.
Returns are for one year to 23rd July 2008, bid to bid basis, income reinvested.

For more on ethical investment visit: www.eiris.org.uk

For more on unit trusts, vist the Defaqto Best Buy tables (click on  the sector links on the left hand side):
http://www.defaqto.com/consumer/investments/unit-trust-sectors.aspx
Read our guide to ethical investment:

http://www.defaqto.com/consumer/investments/ethical-investments.aspx

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Lenders raise fixed rates, but savers have rarely had it so good

June 13, 2008 | posted by Pam Atherton in Banking, House prices, Loans, Mortgages, Savings | comments (0)

More than a dozen lenders have raised the cost of their fixed rate mortgages, further tightening the credit crunch for homebuyers.

The hikes reflect the higher cost of inter-bank lending rates, falling house prices and fears of interest rate rises before the end of the year.

The average cost of a two year fix, on a 90 per cent loan-to-value loan, has jumped to 6.75 per cent, as major lenders such as Halifax, RRS and Birmingham Midshires reprice their deals.

The Council of Mortgage Lenders says that fixed rate deals became more popular in April, accounting for 59 per cent of all new loans.

The cost of mortgages for those with only a small deposit is becoming increasingly expensive, with Abbey raising the cost of its five year fix (for those with only a 5 per cent deposit), to 7.04 per cent.

This deal  also comes with an eye watering £2,499 arrangement fee, payable upfront.

But for savers, conditions have rarely been better. Research by Defaqto’s banking consultant, David Black, shows that 13 banks and building societies are paying 7 per cent (gross AER) or more on one, two or three year fixed rate bonds, on a minimum investment of  £1,000.

Mr Black says: “It’s a rare event when fixed rate bonds paying 2 per cent above the base rate are freely available. Last year, when the base rate was higher than it is now, a handful of 7 per cent bonds were briefly offered, but these were quickly withdrawn as investors piled in. The sheer volume available now suggests that some of the current crop will be around for sometime longer.”

To compare savings rates, visit: http://www.defaqto.com/consumer/savings-accounts/term-accounts.aspx

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