Friends Provident has given its Stewardship International unit trust a more internationally diversif...
Friends Provident has given its Stewardship International unit trust a more internationally diversified portfolio.
Until recently the ethically invested fund had no exposure to Japan and only 3% in Asia from holding Australian resource companies.
Over the past few months the fund has reduced its exposure to the UK from 44% in January to 26%. The monies have been slowly invested into Asian and Japanese equities.
The restructured portfolio now has a 10% weighting in Japan and a 7% weighting in Asia. Its exposure to the US market has increased from 19% to 25%, while its position in Europe is unchanged at 29%. The balance of the portfolio is in cash.
Craig Mackenzie, director of social responsible investment at Friends Ivory & Sime, said the increased exposure to Asia was due to the fact that his team were now able to ethically screen companies in the region. Until five years ago the level of detailed information on companies with regards to ethical issues was unavailable, he said. He added: "Due to pressure from institutional shareholders and the media these companies now have to report their environmental and ethical policies."
Although Mackenzie's team are now able to research companies in Asia there are fewer qualifying companies in the region than in the US or Europe. The restructured portfolio means it is overweight the Pacific basin region, which includes Japan, and also Europe. The fund is underweight the US where manager Bambos Hambi believes the prospects are mixed.
Looking forward Hambi is expecting a slowdown in the US. He points out that unemployment in the US is at a 30-year low. When unemployment is low wage demands push up inflation. To counter the threat of inflation the Federal Reserve raised interest rates by 0.5% last week. Hambi said: "Equity markets rarely make significant progress during monetary tightening and go into reverse if rate rises are pronounced."
He believes the problems in the US should not adversely affect growth in Europe or Japan as both markets are at the early stages of their respective growth cycles.
Overall Hambi is reasonably positive about global growth prospects. He said: "Although equity markets have gone through a volatile phase, the combinations of moderately lower bond yields and weaker equity markets has improved equity market valuations. Recent setbacks are a healthy correction, rather than the start of a new trend."
For the the year to 10 May the £46m Stewardship fund is ranked 69 out of 146 in the Standard & Poor's Global Growth sector on an offer to bid basis. During the period it rose by 15.1% compared to an average rise of 15.5%.
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