Axa Investment Managers has added to its Oeic Distribution range with the launch of an ethical sub-fund.
The fund is managed by Jim Stride, managing director and head of UK equities, and is the fourth addition to the range. Distribution funds mainly invest in blue chip equities, index linked gilts and government bonds with varying degrees of asset allocation.
Rob Bailey, the head of UK retail sales at Axa IM, says the intermediary sector has long supported the Distribution range from the intermediary sector and many advisers operate with an ethical bias.
The ethical sub-fund will be based on the portfolio of the Distribution fund but stocks will be screened using a filter called Iris so companies that fall into sectors such as energy, mining or tobacco are removed.
Richard Marwood, a fund manager on Stride’s team, says this eliminates half of the FTSE All-Share universe. However, on the ethical fund they favour utilities and telecoms, with Vodafone being the largest equity holding.
Stride says: “The demand profile for water companies is quite predictable. Demand goes up in the summer, when the population grows and when new dwellings are built. The companies have reliable gross revenue streams and have fantastic business models.”
His favourite stock in this sector is Southern Trent. Stride is keen on index-linked gilts and over 43% of the Distribution fund is invested in this area.
He says: “These are either uncorrelated or negatively correlated to other asset classes, which makes them uniquely attractive. In times of market or economic turmoil where equities have fallen, index-linked gilts went up in value.”