| Fund Company | NEI Investments |
| Fund Type | Global Equity |
| Rating | $$$ |
| Style | Value |
| Risk Level | Medium |
| Load Status | Optional |
| RRSP/RRIF Suitability | Fair |
| TFSA Suitability | Fair |
| Manager | KC Parker since November 2007 |
| MER | 2.10% |
| Code | NWT 084 – Front End Units NWT 184 – Low Load Units |
| Minimum Investment | $500 |
Analysis: For some investors, building a portfolio involves more than just earning a decent return on their investments. They want to do the right thing and invest only in companies that take an active stand on such things as human rights and the environment. While the feel good factor has always been good with Socially Responsible Investing (SRI), it has had mixed results when it comes to investment performance.
One fund which has thus far bucked that trend is the Ethical Global Dividend Fund, which is managed by KC Parker of Beutel Goodman. This fund, with a go anywhere mandate looks for high quality, profitable companies that generate high levels of free cash flow that is either reinvested back into the business, or returned to shareholders through share buybacks or a growing stream of dividends.
Performance has been strong when compared to not only its peer group, but also the benchmark. As of May 31, the three year return was 7.8%, outpacing the MSCI World Index by nearly 30 basis points, and finishing in the top quartile. The portfolio is concentrated, holding around 30 names, with the top 10 making up more than two thirds of the fund. Not surprisingly, this has resulted in a level of volatility that is in the upper half of the category, a rare occurrence for a value focused fund.
Ethical are very active shareholders and encourage companies to improve their environmental, social and governance practices through dialogue, shareholder resolutions and proxy voting. They are not afraid to take action if a company does not want to play ball. For example, they recently turfed Great-West Life from the portfolio because they didn’t want to address or discuss the risk of climate change to its insurance business.
Looking ahead, the manager is cautiously optimistic on equities, and believes that the risk reward profile looks attractive, particularly when compared to fixed income. The focus in the near term will be in the more defensive and cyclical sectors of the market, with overweight positions in industrials and health care.
Our biggest concern with this fund is its volatility, which has been above the benchmark and the category average. However, for investors who can stomach a bit more volatility in return for knowing they are investing in companies with a well defined eithical stance, this is a great fund to consider.