Investment platform AJ Bell made a ream of changes to its recommended funds list in July, adding one new active fund and chopping and changing both its passive and investment trust recommendations.
The only active fund added to the list in July was Trojan Ethical, managed by Charlotte Yonge since its launch in March 2019.
Over this time, the fund has made 28.1%, beating its average IA Flexible sector peer by 7.9 percentage points but falling behind the UK retail prices index benchmark, which has soared in recent years as Covid-related supply chain disruptions, war in Ukraine and a move away from globalisation have all contributed to rising inflation.
Total return of fund vs sector and benchmark since launch
Source: FE Analytics
“This addition offers investors exposure to a multi-asset vehicle, managed by a tried and tested management team that has flexibility to vary allocations to any of their four asset classes: shares; fixed income; precious metals and cash (cash like instruments) with an overlay of ethical exclusions prohibiting the inclusion of companies selling alcohol, tobacco, armaments and gambling amongst other areas,” the team said.
Passives were the main area of focus last month in terms of changes, however. The fund shop picks tracker funds based on five main criteria: the fund management group; investment approach (only selecting funds that physically replicate the index they track); cost; fund size and comparison to the peer group.
On this front, two passive funds failed to pass muster. Amundi MSCI Japan ETF was removed from the list as the team decided it no longer required two passive options in the region.
“Having reviewed the two passive options for Japan, an index fund and an ETF, we took the decision to simplify the choices for passive investors in this region, removing the ETF due to the index fund being a better value selection,” they said.
The other fund on the chopping block was iShares Core £ Corporate Bond ETF, which was replaced by iShares Corporate Bond Index, which the team said was a “better value selection” than the ETF.
Staying in the bond sphere, State Street Global High Yield Bond Screened Index fund was added as investors are paying more attention to their fixed income holdings.
Turning to stocks, HSBC MSCI China UCITS ETF made the list in July as the “growing economic importance of China” means the team believes it would be worthwhile offering investors a passive way to invest in this country.
For investors that want shariah-compliant investments, iShares MSCI World Islamic ETF was also put on the list, offering investors a chance to buy companies run with the principals of the Islamic faith and Sharia law.
Turning to the firm’s dedicated investment trust recommendation list, the AJ Bell analysts lost faith in Bankers Trust, after years of underperformance.
Although the trust has made 121.4% over 10 years, double that of the FTSE All Share benchmark and slightly ahead of the 118.6% return from the average IT Global peer, it is 11th of the 13 remaining funds in the sector over this timeframe and some 65 percentage points behind the MSCI World index – a more typical benchmark for global portfolios.
Total return of fund vs sector and benchmark over 10yrs
Source: FE Analytics
The trust was “removed due to a lack of conviction in its ability to meet its stated objectives,” the AJ Bell team said.
Troy Income & Growth was also removed following the departure of Francis Brooke, who stepped back from fund management duties in 2021, having run the trust since 2009.
The trust is run by Hugo Ure and Blake Hutchins, who were added as co-managers in 2015 and 2020 respectively. Over 10 years the portfolio has made 56.9%, a bottom-quartile effort in the IT UK Equity Income sector, while its starkest underperformance has come over three years, when it has made 4.4% compared with a 37.2% gain for the peer group and 35.3% rise in the FTSE All Share index.
The team said that a change in the process “needs more time to bed in before we can determine whether it is suitable for the list”.
One fund added, however, was Personal Assets, also run by Troy Asset Management. The rationale for addition was the same as for Trojan Ethical above, although the portfolio does not have ethical overlays.
The trust, which is run with a cautious mindset and aims to limit losses, has beaten its peers over five and 10 years and has appeared in the top half of the IT Flexible Investment sector in seven of the 10 years since 2013.