Standard Life Investments will unveil a European Equity Ethical fund next week. The fund will be run by Stuart Fraser, lead manager on the firm’s £70m European Equity Growth portfolio. Fraser (pictured) has run the ethical fund as a pension mandate for more than four years.
The portfolio will be launched with £40m in assets and will use a positive and negative ethical screening process. Positive criteria include companies that make “a positive contribution to the environment”, have sound employment practices and have clear policies on bribery and corruption.
Negative criteria include firms that use animal testing or genetic engineering, produce alcohol or tobacco, or have an involvement in gambling. In sector terms, pharmaceuticals, beverages and defence are excluded.
Fraser says: “If investors do not want to own certain things, we can make them more comfortable.”
The portfolio contains 50-60 stocks and Fraser says it has a greater bias to mid-cap stocks than the European Equity Growth he runs. His largest holding is Ramirent, a construction equipment rental firm based in Finland. Fraser says the sector is “very immature”, compared with Britain. He also holds Cramo, a competing firm likewise based in Finland.
The 4% and 3% allocations to Ramirent and Cramo respectively have caused a significant overweight to the Nordic region. Norway and Finland account for about 25% of the portfolio, with Austria, Denmark, Greece, Ireland and Sweden also overweight. Underweights include France, Germany and Switzerland, where ethical screening excludes the big oil companies.
However, Fraser takes a bottom-up approach to stockpicking and country weightings are a function of where he finds the most opportunities. Most of his holdings appear in both the ethical portfolio and European Equity Growth. He has added positions in two utilities companies and Q-Cells, a German solar cell maker, to the ethical fund.
Fraser’s performance on European Equity Growth has been impressive since its launch on November 16, 1998. According to Morningstar, the fund was ranked first quartile from inception to September 10. It was also first quartile over the past five and three years. The fund achieved first place out of 91 funds in the Europe excluding UK sector over the past 12 months.