Global Equity Versus Ethical Equity Funds

Morningstar's Muna Abu-Habsa has awarded Aberdeen World Equity a Silver rating, and its ethical cousin a Bronze

Holly Cook 21 February, 2012 | 10:24AM

Morningstar fund analysts have recently updated their ratings on Aberdeen World Equity and its ethical cousin Aberdeen Ethical World Equity, but the latter's conscientious slant means the difference between a Silver and a Bronze rating.

Aberdeen World Equity, which is suitable as a core holding for investors seeking global equity exposure, retains its Morningstar Analyst rating of Silver, thanks in part to the management team's excellent stock selection. Morningstar analyst Muna Abu-Hasa says the global team has demonstrated a strong ability to cherry-pick the better locally derived ideas. A unique feature of their approach is that there are no quantitative filters and the list stock ideas instead results from fundamental research. "Financials, for example, have had a tumultuous few years but the team correctly avoided Western banks in favour of insurers and Asian financials that were less affected by the credit crisis," Abu-Habsa writes in her recent research report. "This illustrates the contribution from comparative analysis made by the global team in Edinburgh."

Aberdeen Ethical World, meanwhile, which is also a suitable core holding for those seekng an ethical global equity mandate, has retained its Bronze rating. As with Aberdeen World Equity, this fund also relies on the same global team's stock picks, but companies that fall out on social, ethical or environmental grounds are replaced where a suitable alternative can be found. "The ethical mandate results in structural underweights in certain sectors that screen poorly," Abu-Habsa says, "the clearest example is healthcare, as companies involved with animal testing are completely excluded." Conversely, the healthcare sector represents more than 12% of the World Equity fund's portfolio (data as at January 31, 2012).

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About Author

Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk

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