Stewardship Income dispels the myths of ethical investing

As Ted Scott's Stewardship Income fund makes it onto the Principal White List for the fifth consecutive year, it disproves the myth that funds with an ethical screening are higher risk.

The White List, which is part of an income study published by Sevenoaks-based Principal Investment Management, identifies the best and worst performing funds in the UK Equity Income sector over the past five years, taking into account volatility.

Stewardship Income fund, managed by Ted Scott (pictured) since 1998, is not only the sole ethical fund to appear on the White List but it is also the least volatile, with a five year volatility average of 2.7 compared to the average for the list of 3.4.

Scott said: "Over twenty years ago when the first ethical funds were being launched onto the UK marketplace, many people thought their strict ethical screening process meant investors would have to sacrifice returns and take on more risk because of the funds' natural bias towards small and medium sized companies. Indeed, some investors went as far as to label the Stewardship funds the 'Brazil' funds because you would have to be 'nuts' to invest in them.

"However, public sentiment towards ethical investing is turning around as strong medium and long term performance numbers prove ethical funds can match and even beat their unconstrained competitors."

Although 2005 was a tough year for ethical funds on the whole, unable to own the metal and mining stocks that led the market rally, Scott's fund was able to close off 2006 with a top decile ranking in the IMA UK Equity Income sector.

Income investors who have followed Scott's performance closely but are still put off by the ethical restrictions of Stewardship can invest in the unconstrained F&C Growth & Income fund, managed by Scott since July 2005.

Under Scott's tenure, F&C Growth & Income fund, which once featured on the Principal Black List has since been removed. Over one year to 29 December 2006, the fund posted a total return of 23.75% compared to the sector average of 17.52%, ranking it in 7th place out of 87 funds in the sector. Assets under management have also sky rocketed from £15m to £71m today.

"Scott has established a great track record with the Stewardship funds and since taking over management of F&C Growth & Income Fund he has resurrected the performance and attracted high levels of investment. We are confident that under his tenure F&C Growth & Income will make it onto the White List in the near future," said Jason Hollands, Director, Head of Communications for F&C.