Fund Objective

The fund aims to provide long term growth by investing in a diversified portfolio of UK equity assets that meet our strict ethical criteria.

View on Past Performance

UK equities recorded only a slight gain in February, as prospects of a US economic recession continued to cast a long shadow over global markets. Investors focused on the troubled banking sector, with news of further large writedowns by some UK banks denting already fragile investor sentiment. Among the larger banks, HBOS suffered significant weakness on news of falling profits, and this also weighed on the share prices of Lloyds TSB and Barclays.However, February was a positive month for the mining companies on the back of strong commodity prices and bid activity. BHP Billiton raised its bid price for Rio Tinto. As widely anticipated, the Bank of England cut UK interest rates by 0.25% to 5.25%, prompted by falling house prices and weakening economic data.The Fund returned 4.47% over the month, outperforming both the UK All Companies sector average return of 2.86% and the ethical sub-sector average of 1.99%. Our holding in Expro International proved beneficial, after the company was rumoured to be an acquisition target, as did our investment in ethical mining company Aquarius Platinum, on the back of surging commodity prices.Returns were also bolstered by our position in Dominos Pizza, which recovered strongly in February after its solid results demonstrated the soundness of its business model even in a challenging business environment. On the downside, the favourable market conditions for mining related stocks meant that the Fund's lack of investments in companies such as Rio Tinto, BHP Billiton and Anglo American was negative for returns.We increased our holding in online fashion retailer ASOS, as the company has been benefiting from the structural growth in online shopping and retains a strong market position. We also added to our position in Axon, a leading provider of SAP accounting software, as the stock was attractively priced despite the company's encouraging growth potential.

Future Expectations

The UK equity market is now showing signs of looking through earnings downgrades, having already priced in an extremely negative scenario on the credit crisis, consumer activity and the housing market. The key trigger for the market would be the resolution of the credit crisis, the return of merger and acquisition activity and further monetary policy easing.Even in the absence of these triggers, the market remains supported by an extremely low valuation in terms of earnings, dividend and free cashflow. The market also remains underpinned by strength in the resources sector, with industrial and mining companies continuing to perform well.One theme that has resulted from our stockpicking strategy is heavy investment in a number of stocks related to urban regeneration and social housing construction. Stocks fitting this theme include Bellway, Rok, Workspace and Morgan Sindall.

Fund Details