This fund invests in quality investment grade bonds, looking for a competitive income whilst generating attractive total returns. Ethical exclusions are simple: no mining, arms, gambling, pornography, animal testing, nuclear power, alcohol or tobacco. This rules out about one third of the index. All positions must also have at least one positive environmental, social or corporate governance quality.
Our opinion
This fund typifies stable management, with Bryn having been at the helm for nearly 20 years. It has outperformed regardless of its ethical constraints, illustrating that income and ethics can be combined without sacrifice. It is a solid, core investment grade bond fund.
Company description
Established in 1999, Rathbone Unit Trust Management is the asset management subsidiary of Rathbone Brothers Plc. It was awarded the Elite Equities Provider Rating in 2015, 2016, 2017 and 2018. Rathbone Brothers Plc is listed on the London Stock Exchange and employs more than 250 investment professionals in a number of offices around the UK.
Fund manager
Bryn Jones has been managing Rathbone Ethical Bond since November 2004. He studied human geography at the University of Birmingham and believes learning how people act the way they do is a very useful tool, particularly when meeting company management teams. Before joining Rathbones, Bryn worked with Merrill Lynch Investment Managers.
Bryn is supported by Stuart Chilvers. Stuart joined Rathbones in September 2017 having begun his career at Brown Shipley. He graduated from Bath University with a first-class Bachelor’s degree in Mathematics.
My fund offers one of the best yields in the corporate bond fund universe and the bonus of a strong ethical screening process.
Bryn JonesFund manager
Investment process
The fund has a four-step investment process. Idea generation comes first, with extensive research and meetings. This is followed by a ‘four Cs plus’ approach to assessing bonds; looking at character - the quality of the management team; capacity - the ability to pay off the debt; collateral - what specific assets are offered as security; and covenants - the rules behind what the company can borrow. The ‘plus’ is conviction in the idea. Relative valuations are considered in the penultimate step of the process. The ethical screen is applied at the final stage and companies will also need at least one positive ethical factor to be included in the fund. The ethical research is provided by Rathbones’ Greenbank division.
ESG
ESG - Explicit
Ethical research for this fund is provided by Rathbone Greenbank Investments, a dedicated ethical, sustainable and impact team of Rathbones, that works with the fund manager. After attractive corporate bonds are identified by the manager, Rathbone Greenbank’s ethical researchers will then investigate the companies issuing the bonds. Companies are assessed against a number of positive and negative social and environmental criteria. Negative screening excludes organisations involved in activities such as animal testing, alcohol manufacturing, fossil fuel exploration and production, arms dealing and gambling. Issuers involved in any negative criteria will be discounted. Positive practices include community investment, management of environmental impacts and provision of products or services that offer social or environmental benefits.
Those demonstrating well-developed policies and practices in at least one positive area will be considered for investment. The shortlisted bonds will then need to be approved by a member of the fund’s ethical committee. The portfolio, criteria and investment and research processes are subject to an annual review and subsequent report.
Risk
The risk profile for Rathbone Ethical bond fund is average relative to its sector, but it is not low-risk. In the words of Bryn, it is not a diversification from equities, or somewhere to hide if things get nasty. It tends to do better when markets are rising steadily or falling, but may underperform in strongly performing gilt markets.
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