Investment
Perpetual launches ethical fund

Perpetual launched a new fund that applies strict social and ethical considerations to meet a gap in the local fixed income market.

The Perpetual Ethical SRI Credit Fund aims to meet investors' growing demand for a diversified portfolio of ethical, socially responsible fixed income assets.

Portfolio manager and head of fixed income Vivek Prabhu told Financial Standard that after engaging directly with financial advisers and research houses such as Lonsec and Morningstar, it became clear there's an absence of choice in the fixed income space for ethical or SRI funds.

"We're seeing a real opportunity there," he said. "It is one of the first floating rate credit funds in Australia combining a social responsibility lens and investment performance."

The fund applies both ethical and SRI screening methods to invest in floating rate bonds.

Ethical screening relates to the activities the companies are involved in, he explained. By way of example, some companies that may be screened generate 5% or more revenue from alcohol or tobacco sales; produce uranium; emit fossil fuels; manufacture nuclear weapons; or engage in genetic engineering and so on.

SRI screens on the other hand, assesses companies on how they conduct business against a socially responsible and governance criteria, Prabhu said.

Furthermore, the fund adopts a barbell strategy which preserves the defensive characteristic of fixed income and at the same time generates strong cash-plus returns, he added.

This encompasses investment grade bonds with a rating of BBB- and above, supplemented by a smaller allocation to high-yield and unrated bonds.

"With interest rates bottoming out in Australia, the timing of the fund's launch means investors are poised to benefit from rising interest rates as the assets are not locked into a fixed interest rate," he said.

Read more: PerpetualSRIEthical investingFinancial StandardLonsecMorningstarSRI Credit FundVivek Prabhu
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