F&C plans ethical bond fund

London, 27 September: UK-based asset manager F&C is to launch a fund that will only invest in bonds issued by ethical companies.

Structured as an open-ended investment company, it will launch next week with more than £40 million ($80 million) of existing assets. It will be available to retail and institutional investors, with minimum investments of £1,000 and £500,000 respectively.

The universe of eligible securities will be screened on both positive and negative criteria, and the fund will actively target issuers which contribute to sustainable development.

For example, it could include companies that provide basic necessities such as housing and water, or those involved in renewable energy, but will exclude issuers in the tobacco, alcohol, gambling, pornography or weapons industries.

As well as corporate credits, the fund can invest in government-backed companies and national development institutions that meet the ethical criteria, financial stock from institutions with a strong track record in sustainability and securitised bonds from approved issuers. Government bond issues will be excluded. Up to 30% of holdings can come from outside the UK, but these will normally be hedged back into sterling, F&C said.

The F&C Ethical Bond Fund will be benchmarked against the Sterling iBoxx non-Gilts Index of UK corporate bonds.

“While this fund expects companies to meet high sustainability standards and has strict ‘dark green’ ethical criteria, it is important to note that in terms of investment performance we are targeting a return against a mainstream benchmark,” said Rebecca Seabrook, who will lead-manage the fund with Ian Robinson. They are co-heads of F&C’s UK credit team which manages more than £10 billion of assets.