Fund manager Lesley Duncan has an extensive track record in both UK equity and ethical investing, having taking over the reins of this fund in 2004. She is a member of Aberdeen Standard's large UK equity desk, and benefits from shared expertise and research when constructing the portfolio. The fund's fairly strict ethical approach tends to exclude many of the larger companies in the index, leading to a bias to mid-cap stocks and also to certain sectors. As a result performance often differs from the benchmark and peer group and can be volatile. As with all ethical funds, investors should check the fund's ethical restrictions in the prospectus before investing.
The first stage of the investment process is the negative ethical screen of the FTSE All-Share universe. Aberdeen Standard employs MSCI to provide its external ethical screening service. This is supplemented by an internal responsible investment team which is independent from the fund managers. The range also has an Ethical Funds Advisory Group that meets every six months to review the ethical policies and procedures in place. Current exclusions include: companies that cause environmental damage or are involved in nuclear power, animal testing, genetic engineering, intensive farming, alcohol, gambling, pornography, tobacco and weapons. They also exclude any company with human rights violations or poor business practices. These screens eliminate around 40% of the FTSE All-Share by market value. The second stage of the investment process is the positive ethical rating. Positive inclusions include: environmental technology and pollution control companies, companies that promote equal opportunities, companies that donate to charities or are strongly involved in the community, and companies with good principles of business behaviour and ethics. The third stage of the process seeks to rank the companies remaining in the acceptable universe into preferred stocks/ best ideas that will account for at least 80% of the portfolio. This stage of the process is bottom-up and research focused, with the UK equity desk looking for opportunities where companies are focused on change. In forming the portfolio the manager feeds off the rest of Standard Life’s UK desk, using its proprietary quantitative stock Matrix and taking ideas from the team’s “Winners List” of high conviction ideas. The manager seeks a tracking error between 4-10% of the index so the fund is diversified across the sectors that it can invest in.