F&C Stewardship funds benefit from market volatility

The markets have become increasingly negative in recent months; the financial crisis in Greece, fears of contagion to other European economies, the new UK Government calling for austerity and the weakening global economic recovery have all served to heighten risk aversion.

After a difficult few years in terms of relative performance for ethical funds, the F&C Stewardship Income and F&C Stewardship Growth funds - both managed by Catherine Stanley - enjoyed a strong period relative to the FTSE All-Share Index, pushing performance ahead both year-to-date and over 1 year and demonstrating that adopting an ethical remit can contribute positively to performance.

"The BP crisis has highlighted the concerns of ethical investors around resource stocks and having no position has of course been a significant positive contributor to performance. Similarly, the reversal of fortunes for miners has also helped," Stanley commented.

Performance has been strong despite the fund not being able to hold tobacco, beverages and pharmaceuticals stocks - traditionally seen as safe havens in weak markets - which have held up well in the second quarter. This is due to good performance from a number of small and mid-cap stocks, towards which Stewardship has a natural bias due to greater ethical compatibility in these areas.

Stanley cautions that the economic and market backdrop remains nonetheless challenging.

"Although the FTSE 100 has been hampered by the likes of weakness in the resource space in the wake of the BP crisis and the threat of increased mining taxation as a way of raising funds for governments, these issues are being resolved, allowing the market to move forward. I will continue to seek out opportunities in areas where structural growth can be found; however, there are increasing uncertainties around the impact of reducing Government spend and its effect on the domestic economy. Economic indicators globally have weakened, though companies continue to report good results," she concluded.