The Investors Chronicle had a good go this week at trying to rain on the National Ethical Investment Week’s parade. “UK ethical funds: nine in 10 failing European standards” shouted their headline, preceding an article which highlighted that only three fund management groups or nine UK funds comply with the European Social Investment Forum’s (EUROSIF) transparency code. Compliance with this code is compulsory in France and Belgium for funds to be marketed as ‘ethical’.
WHEB’s listed equity team proudly displays the EUROSIF SRI Transparency logo on its website and presentations, having taken advantage of the free registration for UKSIF members to the scheme. I have frequently told clients how pleased we are to be one of the first to commit to the standards and practices required of the code, and I am surprised that more of UKSIF’s membership have not done the same.
What the Investors Chronicle misses however, is that this doesn’t represent a challenge to just green and ethical investment funds, but should be seen as an issue on which the entire investment funds industry is failing to respond to adequately. Transparency, accountability, fund governance and the alignment of investment managers with their clients presents a set of challenges to the industry as a whole. The IMA website reports 2,468 UK domiciled funds in June 2013, hence my 99.6% headline above.
At WHEB, we have looked to introduce measures that improve our alignment with our clients’ interests, such as co-investment in our funds and transparent discipline around fund capacity. We’ve improved the governance of our fund in favour of our clients through the use of an independent Investment Advisory Committee which challenges us on our adherence to our mandate. Transparency gives an edge to all of this. For example, by publishing the minutes of our Advisory Committee or the full list of holdings in our fund it gives clients better tools to see that we employ the ‘Ronseal principle’ (ie that the fund ‘does what it says on the tin’). These measures are not specific to ethical, or sustainable and responsible investment funds, and I would like to see them applied broadly across the funds industry. Too often clients feel that a fund manager has told them they will act and invest in a certain way, and the reality has been quite different. The measures described above go some way to guarding against such ‘mandate drift.’
EUROSIF’s transparency code should be seen as a starting point and a set of standards to which all should aspire. It is to be expected that the sustainable and responsible investment funds industry should be at the vanguard of tackling the problem, and I would encourage all UKSIF members to sign up to the EUROSIF guidelines. But the real problem that the Investors Chronicle should be highlighting is the opaqueness of the funds industry at large, rather than looking for any excuse to try to undermine those that are making an effort to solve these problems.
Risks include: the price of shares (“Shares”) in FP WHEB Sustainability Fund (“Fund”) may increase or decrease and you may not get back the amount originally invested, for reasons including adverse market and foreign exchange rate movements. Past performance is not a guide to future returns. The Fund invests in equities and is exposed to price fluctuations in the equity markets, and focuses on investments in mid-sized companies in certain sectors so its performance may not correlate closely with the MSCI World Index (the Fund’s benchmark). For full risks, please see fund prospectus on www.whebgroup.com.
General: This blog, its contents and any related communication (altogether, the “Blog”) is issued by WHEB Asset Management LLP (“WHEB Asset Management”). It is intended for information purposes only and does not constitute or form part of any offer or invitation to buy or sell any security including any shares in the FP WHEB Sustainability Fund, including in the United States. It should not be relied upon to make an investment decision in relation to Shares in the FP WHEB Sustainability Fund or otherwise; any such investment decision should be made only on the basis of the Fund scheme documents and appropriate professional advice. This Blog does not constitute advice of any kind, investment research or a research recommendation, is in summary form and is subject to change without notice. The performance shown does not take account of any commissions and costs charged when subscribing to and redeeming shares. WHEB Asset Management has exercised reasonable care in preparing this Blog including using reliable sources, however, makes no representation or warranty relating to its accuracy, reliability or completeness or whether any future event may or may not occur. This Blog is only made available to recipients who may lawfully receive it in accordance with applicable laws, regulations and rules and binding guidance of regulators. WHEB Asset Management LLP is registered in England and Wales with number OC 341489 and has its registered office at 7 Cavendish Square, London, W1G 0PE. WHEB Asset Management LLP is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 496413. FundRock Partners Limited (formerly Fund Partners Limited) is the Authorised Corporate Director of the Fund and is authorised and regulated by the Financial Conduct Authority with Firm Reference Number 469278 and has its registered office at 8-9 Lovat Lane, London EC3R 8DW. The state of the origin of the Fund is England and Wales. The Representative in Switzerland is ACOLIN Fund Services AG, Affolternstrasse 56, CH-8050 Zurich, whilst the Paying Agent is Bank Vontobel Ltd, Gotthardstrasse 43, CH-8022 Zurich. The relevant documents such as the prospectus, the key investor information document (KIIDs), the Articles of Association as well as the annual and semi-annual reports may be obtained free of charge from the representative in Switzerland.
The MSCI information may only be used for your internal use, may not be reproduced or re-dissseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages (www.msci.com