ii ACE 40 performance review: Q1 2023
14th April 2023 11:03
Here’s how interactive investor’s sustainable funds performed in the three months to the end of March.
ACE 40 performance
Most ACE 40 funds showed a positive return over Q1 2023. The structural bias to the growth style across the list due to ESG considerations, was beneficial, although the alternative energy space came under pressure.
The standout return in the ACE 40 investment ideas came from the Brown Advisory US Sustainable Growth fund that produced a positive return of 11.23%, buoyed by the slight outperformance of the US market, but largely from its growth style bias. The fund managers include sustainable investing traits into their long-term fundamental research process. There is a clear growth bias versus mainstream peers and the fund has a Russell 1000 Growth Index benchmark, but it doesn’t have a very significant bias down the market-cap scale, and this aided performance over the quarter.
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Three of the next four top-performing funds have all benefited from their exposure to continental European equity markets. Vanguard SRI European Stock aims to track the performance of the FTSE Developed Europe Index but excludes companies in that index based on an SRI screening process. The remaining stocks are put through an optimisation process to produce a portfolio that offers similar characteristics to the index. The fund produced a return of 7.88% over the quarter, slightly ahead of the index. LF Montanaro European Income has a focus on dividend growth rather than high yield, and as such shows characteristics that are in line with the house strategy, namely quality and growth. Despite having a small-cap focus, the fund produced a return of just over 7% with good contributions across a variety of names. The final European equity fund is M&G European Sustain Paris Aligned. In 2021, this fund adopted alignment to the Paris agreement with a focus on identifying companies with meaningful plans to reduce carbon emissions. The underlying stock approach has a focus on companies showing sustainable competitive advantages and this results in a growth bias that has been favourable. The positive 6.48% return saw significant contributions from stocks with large portfolio weightings such as DSV, Schneider Electric (EURONEXT:SU), Scout24 SE (XETRA:G24) and Novo Nordisk (NYSE:NVO).
The UBS(Lux) FS MSCI World Socially Responsible ETF (LSE:UC44) is the other fund on the top five ACE 40 performers list for Q1. The fund tracks the MSCI World SRI Low Carbon Select 5% Issuer Capped TR Index and this gives it a slight growth bias versus mainstream indices, which helped returns over the quarter.
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In terms of laggards, one of the weakest funds on the list in Q1 2023 was FP Foresight Global Real Infrastructure with a decline of 3.24%. The fund invests in companies that own or operate physical infrastructure or renewable energy assets globally. Versus infrastructure peers and broader benchmarks, the fund has overweights to the utilities (primarily renewables rather than traditional utilities) and real estate sectors. Both of these came under pressure during Q1 2023 as uncertainty regarding demand for many commercial property sectors continued and energy prices softened as supply was able to keep up with relatively weak demand.
Two other funds were also impacted by the weakness in alternative energy, VT Gravis Clean Energy Income and iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG). The VT Gravis fund has a focus on providing an income in region of 4.5% and primarily invests in closed-ended investment companies and yield companies that are involved in the provision, storage and consumption of clean energy. This can, at times, result in a more stable return profile than that obtained through investing in the S&P Global Clean Energy Index, but over Q1 the fund had very similar losses to the index and the iShares product that is a passive fund tracking that index. The funds saw losses of 2.46% and 3.26% respectively.
The relative weakness of emerging markets impacted the returns of the iShares MSCI EM SRI ETF (LSE:SUES), which fell 1.76%. Emerging markets experienced headwinds due to weakening energy prices, uncertainties surrounding global growth, and political and economic concerns over China.
The final fund on the laggards list was Unicorn UK Ethical Income, with a return that was slightly negative at -0.5%. The fund has a distinct small-cap bias. Smaller companies were weak across geographies in sterling terms, and UK small-caps were particularly weak as investors continued to be concerned about the outlook for domestic growth relative to other global markets.
Top five ACE 40 funds in Q1 2023
| Group/Investment | 3 Month | 1 year | 3 Years | 5 Years |
| Brown Advisory US Sust Gr GBP B Inc | 11.23 | -4.12 | 60.66 | 120.72 |
| UBS(Lux)FS MSCI World SRI USD Adis GBP (LSE:UC44) | 8.05 | -2.09 | 52.49 | 69.00 |
| Vanguard SRI European Stk £ Acc | 7.88 | 7.59 | 54.68 | 41.63 |
| Montanaro European Income £ Inc | 7.09 | 0.86 | 49.29 | 34.61 |
| M&G European Sustain Paris Aligned I Acc | 6.48 | 13.44 | 60.84 | 43.11 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts.
Bottom five ACE 40 funds in Q1 2023
| Group/Investment | 3 Month | 1 year | 3 Years | 5 Years |
| iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG) | -3.26 | -1.77 | 109.35 | 149.38 |
| FP Foresight Global Rl Infras A GBP Acc | -3.24 | -14.18 | 22.07 | |
| VT Gravis Clean Energy Income C GBP Acc | -2.46 | -5.50 | 45.63 | 88.59 |
| iShares MSCI EM SRI ETF USD Acc GBP (LSE:SUES) | -1.76 | -9.14 | 35.41 | 12.21 |
| Unicorn UK Ethical Income B Acc | -0.50 | -6.14 | 31.21 | 4.37 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts.
Top five ACE 40 funds over five years
| Group/Investment | 3 Month | 1 year | 3 Years | 5 Years |
| iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG) | -3.26 | -1.77 | 109.35 | 149.38 |
| Brown Advisory US Sust Gr GBP B Inc | 11.23 | -4.12 | 60.66 | 120.72 |
| Baillie Gifford Positive Change B Acc | 4.87 | -9.32 | 65.94 | 113.56 |
| iShares MSCI USA SRI ETF USD Acc GBP (LSE:SUUS) | 4.74 | -0.50 | 74.55 | 110.12 |
| VT Gravis Clean Energy Income C GBP Acc | -2.46 | -5.50 | 45.63 | 88.59 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts.
Bottom five ACE 40 funds over five years
| Group/Investment | 3 Month | 1 year | 3 Years | 5 Years |
| Lyxor Green Bond (DR) ETF C EUR GBP (LSE:CLIM) | 0.49 | -7.59 | -15.16 | -6.17 |
| Liontrust Sust Fut Corp Bd 2 Grs Inc | 3.43 | -10.55 | -4.74 | -3.65 |
| CT UK Social Bond Z Grs Acc£ | 1.87 | -5.79 | -3.59 | -1.39 |
| PIMCO GIS Global Bond ESG Instl GBPH Inc | 2.48 | -5.97 | -4.87 | -0.30 |
| RLBF II Royal London Ethical Bond M Inc | 2.45 | -10.11 | -4.94 | -0.21 |
Source: Morningstar Returns (GBP) - Total returns for OE Funds and Market Returns for Inv Trusts.
Most-bought ACE 40 funds in Q1 2023
Most-sold ACE 40 funds in Q1 2023
| Baillie Gifford Positive Change B Acc |
| iShares Global Clean Energy ETF USD Dist GBP (LSE:INRG) |
| Impax Environmental Markets Ord (LSE:IEM) |
| Royal London Sustainable Leaders C Acc |
Changes to the ACE 40 list (under review/developments)
No changes in Q1.
ACE 40 videos in Q1
Schroder Global Sustainable Value Equity Fund
The ACE 40 investments list is selected and managed by our independent research partner Morningstar and reviewed by our in-house investment experts to help narrow down the wide choice of available investment products. We believe it represents a set of high-quality choices, across different asset classes, regions, and investment types.
However, you should note that the selection of ACE 40 investments list is not a ‘personal recommendation’. This means we have not assessed your investment knowledge, your financial situation (including your ability to bear losses), your investment objectives, your risk tolerance, or your sustainability preferences.
You should ensure that any investment decisions you make are suitable for your personal circumstances, and if you are unsure about the suitability of a particular investment or think you need a personal recommendation, you should speak to a suitably qualified financial adviser.
The past performance of an investment is not a reliable indicator of future results, and ii does not guarantee or predict the future performance of the ACE 40 investments list as a whole or the constituent investments.
Risk Warning(s)
The value of your investments may go down as well as up. You may not get back all the money that you invest.
Investing in emerging markets involves different risks from developed markets, in many cases the risks are greater.
The value of international investments is affected by currency fluctuations which might reduce their value in sterling.
Disclosure(s)
All funds listed are the Accumulation version of the fund, where available, where any income generated within the fund is reinvested automatically. Income versions of these funds may also be available for investors looking for income generated to be paid directly into their account.
Annual performance can be found on the factsheet of each fund, trust or ETF. Simply click on the asset’s name and then the performance tab.
Any changes to the ACE 40 investments list and the rationale behind those decisions will be communicated through the Quarterly Investment Review.
Details of all ACE 40 recommendations issued by ii during the previous 12-month period can be found here.
ii adheres to a strict code of conduct. Members of ii staff may have holdings in one or more ACE 40 investments, which could create a conflict of interest. Any member of staff involved in the development of research about any financial instrument in which they have an interest are required to disclose such interest to ii. We will at all times consider whether such interest impairs the objectivity of the recommendation.
In addition, staff involved in the production of the ACE 40 investments list are subject to a personal account dealing restriction. This prevents them from placing a transaction in the specified instrument(s) for five working days before and after an investment is included or amended and made public within the ACE 40 investments list. This is to avoid personal interests conflicting with the interests of investors in the ACE 40 investments.
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