When Friends Provident first floated the idea of an ethical fund in 1984, “sceptics poured cold water” on it, says present manager Ted Scott in The Scotsman. They called it the “Brazil fund…because you would have to be nuts to invest in it”. But in the 23 years since, the Stewardship Growth and Income Fund, now managed by Friends Provident subsidiary F&C, has established itself as one of the leading income funds out there. Over the past five years, it’s returned 115% against an average of 92.5% for the UK equity income sector.
Scott cites his ‘barbell’ approach to investing as the reason for the fund’s success. High-yielding equities and bonds provide income, while low-yielding, high-growth equities boost its capital return. Right now the fund is overweight relatively cheap large caps, such as Vodafone and oil explorer Cairn Energy. But Scott has recently begun to reduce his positions in the utilities sector, which he believes has been pushed too high by bid speculation. “The water stocks in particular look expensive when you consider their asset values. Unless there is a bid, I think we will see little progress,” he tells The Daily Telegraph.
Scott, meanwhile, has won a reputation as a manager with “a good feel for markets”, says Lee Gardhouse of Hargreaves Lansdown in Fund Strategy Note that two months ago he suggested that a 15%-20% drop in the markets wouldn’t surprise him.
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Stewardship Growth and Income Fund top ten holdings
Name of holding, % of assets
Vodafone Group, 6.39
Alliance & Leicester, 3.79
National Grid, 3.56
United Utilities, 3.34
Scottish & Southern Energy, 2.67
Cairn Energy, 1.81
BG Group, 1.61
Carpetright, 1.37
Air Partner, 1.36
Cattles, 1.21