Rathbone Unit Trust Management Visit Ethical Futures

Rathbone Unit Trust Management Visit Ethical Futures image

The management team of Rathbone Ethical Bond fund visited Ethical Futures last week. As part of our process of ongoing due diligence, we were keen to meet with Fund Manager, Bryn Jones and Senior Credit Analyst Noelle Cazalis, to discuss both performance and ethical aspects of the fund.


The Rathbone fund was one of the first ethical ‘fixed interest’ funds in the market place and after a slightly rocky start, the fund has performed well – consistently out performing its peer group in both the ethical sector but also amongst mainstream fixed interest funds – providing that having good ethical credentials needn’t hamper performance. One of the funds characteristics is a relatively high income yield. This often means that funds pursuing this objective, take a higher degree of risk but Bryn has managed to achieve both the high yield and rising capital value over the medium to longer term.

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The fund invests in sterling ‘corporate bonds’ invest, which are effectively loans to institutions and companies. The return on these is a combination of the interest (or coupon) payable on the loan over a fixed duration and any capital appreciation that can be achieved on trading assets. As an asset class, it is generally deemed to be lower risk than equities (shares) but can be impacted by low interest environment such as we have at the moment. Bryn explained that at present, they particularly favour investment in ‘financials’, such as insurance companies and building societies, as well as property back investments for their core holdings.

Not only does the fund screen out undesirable sectors such as armaments, alcohol and tobacco but it also is actively focused on seeking out positive investments with a real social impact as part of its portfolio. Indeed, Noelle explained that having become involved in a variety of charity and development funding bond issues, Rathbones are now a first port of call for many new issues is in this sector. With a core of relatively traditional, but ethically acceptable investments, the team are then able to spend more time on the analysis and assessment of specialist sectors and it is this conviction and contrarian view that they feel makes the difference to their performance.

The added value is delivered by investments such as the Scope charity bond, or social housing projects such as Chelmer Housing Partnership and the Bristol and Midlands Together housing projects. The ‘Together’ projects not only renovate old properties, but also employ ex-offenders as part of their workforce. The intention is to equip them with new skills and to move them into world of steady work rather than reoffending. Not only can the projects boast a range of affordable low carbon housing, but they are also proud that to date, they have 100% success record in their project with ex-offenders.

Of particular note when discussing these projects with Bryn and Noelle, was the fact that they are both actively involved in the project selection. By this, but only do we mean that they sharpen pencils to do the financial analysis, but also that they go ‘on-site’ in visit the work undertaken by the various projects invest in wherever possible. This approach is commensurate with the style of management that we look for in an ethical manager; that is, not only that they will ‘talk the talk’ but also that they can ‘walk the walk’.

Please note that values can fall as well as rise and that past performance is not a guide to the future.

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