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Katy Owen Investigates The Rathbone Ethical Bond Fund

As this coming armistice day marks the 100th anniversary of the first world war, our Paraplanner Katy Owen considers how ethical investing works – with a spotlight on the Rathbone Ethical Bond fund.

When it comes to investing, most people are deterred by the word ‘Ethical’. Why? Because ethical investments are typically more volatile than non-ethical and the ‘average ethical fund’ can see its underlying performance held back by its ethical selection. So if you’re not looking to be actively ethical you’re probably not going to set out to select the Rathbone Ethical Bond, but this is not your average ‘Ethical’ fund.

As a bond fund, the Rathbone ethical offering competes really well against its mainstream peer group (the Sterling Corporate Bond sector). It has the maximum morning star rating of five stars and it also sits comfortably in the top quartile of its sector as well as coming in 8th out of 93 funds within its sector over the last three years*.

Lead Portfolio manager Bryn Jones is the Fixed Income Director for Rathbone Unit Trust Management. He also manages the Rathbone Strategic Bond Fund. Bryn joined Rathbone in November 2004 and has over 15 years of investment management experience. Bryn’s approach to a successful fund starts in the same way, whether it is ethical or non-ethical, with profitability being the initial objective.

The idea is to overlook the ethical involvement to begin with, and simply create a good investment fund. Once this has been achieved, the fund applies negative screening and eliminates bonds issued by companies who have known involvement with alcohol, animal testing, armaments, gambling, nuclear power, pornography, tobacco and other areas that could be deemed as unethical. The screening research is conducted by the Rathbone Greenbank Investments, part of the Rathbone family who have over twenty years of experience in ethical investments.

The fund also goes beyond simply taking out the ‘badness’ by then including additional positive aspects. Bonds in companies that support community investments, the delivery of beneficial social and environmental products and services, workplace diversity and equal opportunities, human rights and the management of environmental impacts are all considered ethical and therefore are suitably added into the fund. This strategy has worked really well, and the results are respectable. This year the Rathbone Ethical Bond has delivered around 25% more growth than its sector average*.

Finally, the fund research differs from others by digging into the core principals of investments that, on paper appear ethical, by expecting them to go above simply doing the ‘right’ things. As Ben Johnson from Rathbone explains: ‘If the research team don’t like it, they won’t do it’ which leads to a bespoke fund of carefully selected ethical companies with an embedded values-led culture. Bryn Jones takes time to visit various companies to experience first-hand how and why these values takes place.

In the UK there are less than 100 ‘ethical’ funds available to investors, but this number is increasing. With good management and increased awareness, I believe the future of ethical funds is promising. As concerns for environmental and moral issues rise, the word ‘ethical’ in investments should not be automatically discarded. Ethical investing is no longer just about doing ‘good’ and there is increasing potential for decent returns from these types of funds, the Rathbone Ethical Bond is a good example of this.


*Investment Week 27th October 2014

* Please remember that none of our articles are to be considered as ‘financial advice’ and they in no way promote a certain fund or financial product. The above fund may not be right for certain investors and past performance is no guide to the future. If you have any queries in regards to this article, please contact us for financial advice straight away.


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