What is the AJ Bell Favourite funds list?
The AJ Bell Favourite funds list is designed to lighten your research load. There are thousands of funds out there – so we’ve narrowed the field by selecting a high-quality shortlist of funds we believe can deliver their objectives over the long term. To make the list, each fund needs to pass our robust, independent selection process.
What have we changed?
Our customers have been telling us that they'd like to see our list include a wider selection of responsible investment funds. To that end, we’ve introduced four new funds: the BMO Responsible Sterling Corporate Bond, Liontrust Sustainable Future Global Growth, Liontrust Sustainable Future UK Growth, and Royal London Sustainable Leaders and removed the Kames Ethical Cautious Managed fund.
That now makes five ethical funds on the list – including the Stewart Investors Worldwide Sustainability fund – as well as broadening the types of ethical funds included.
What is responsible investing?
Responsible investing looks to focus on companies and industries that are beneficial to humans and the planet – while attempting to avoid companies and industries that are harmful to it. It’s usually centred on three issues, environment, social and governance, or ‘ESG’ for short.
Ethical finance has massively grown in prominence recently, with politicians and shareholders agreeing on its importance. Government initiatives combined with pressure from shareholders means corporates can’t simply ignore the issues anymore.
Previously, there was a broad acceptance that responsible investing meant the end investor would forego some of their total returns. But recently, ESG has been seen as a factor that could actually provide an additional boost to total returns.
One of the current challenges of responsible investing is being able to clearly define the different terms and working towards agreed standards across the industry, though progress is being made.
There are many versions of responsible investing, ranging from ethical (exclusionary) to impact investing (which seeks to generate a net positive societal benefit). So it’s important to understand what the fund you select is focused on.
Tell us a bit more about the funds you have recently added?
BMO Responsible Sterling Corporate Bond – This fund focuses on GBP Corporate Bonds. Its responsible investing brief is undertaken by the in-house Responsible Investment Team at BMO, who conduct extensive research from an ethical and sustainability angle, passing or failing companies based on strict criteria. BMO has a long track record in responsible investing.
Liontrust Sustainable Future Global Growth, and Liontrust Sustainable Future UK Growth – The investment team at Liontrust who run these funds have a strong heritage in responsible investing. They also look to integrate sustainable and fundamental analysis within one investment process, which is thematic in nature. This drives how they construct portfolios.
Royal London Sustainable Leaders – This growth-oriented fund is managed by Mike Fox, who has been involved with it since November 2003. Its investment process is primarily driven by positive screening for environmental, social and governance factors. They operate a scorecard approach in order to determine their conviction, and which also helps decide on stock weightings.
It’s our job to keep the Favourite funds list as up to date and relevant as possible. That’s why we’ve significantly increased our offering of ESG funds – an exciting and growing area, which looks set to become much more mainstream going forward.
The AJ Bell Favourite funds list is designed to be diverse – spanning various sectors and investment styles – to give you plenty of choice. A consequence of this diversity is that it isn’t possible for every fund on the list to perform well at any one time. This is because market conditions which act as tailwinds for some types of funds may be headwinds for others, and vice versa.
Find out more about our Favourite funds list.
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