Ethical Hub : Policy Statement - Pooled Funds

What we believe

Our unique approach to responsible investment gives clients assurance that their investments are managed in line with their ethical standards, and that Epworth can be held accountable to the principles we outline in our pillars.

We also recognise there are times when our clients could benefit from specialist expertise that goes beyond our inhouse offering. This may be, for example, geographical specialisations; sector specialisations; absolute return strategies; venture capital and other early-stage enterprises; and private equity.

Pooled funds represent the most effective way to access this external expertise. Pooled investment funds, or collective investment schemes, are assets of multiple beneficial owners aggregated into single investment vehicles.

Such funds provide access to specific asset classes, thematic investments or strategies that could not otherwise be accessed cost effectively or in the appropriate size without a heightened risk of liquidity becoming unbalanced.

Examples of pooled funds include open-ended structures, closed ended structures and partnerships that can be regulated or unregulated. Epworth’s own funds are open ended unit trusts, that are structured as Charity Authorised Investment Funds. The “platforming” of Epworth’s portfolio clients has increased the range of potential asset classes using pooled funds. These include Alternative assets, Infrastructure, Property, Private Equity, and Venture Capital. Exchange Traded Funds are another vehicle commonly used in Epworth’s Funds.

When Epworth invests through pooled investment funds there may be indirect exposure to business activities and companies that would otherwise be excluded on ethical grounds. This is comparable with an investment in a large, diversified company, which may not merit exclusion on ethical grounds but which, nonetheless, may have some exposure to activities which would result in an exclusion if they were the sole activity of the company.

Our approach

If Epworth utilises pooled funds, the following preferences will be considered:

Pooled Funds Preferences

Exclusions

  • Pooled funds that focus on any excluded activity are not suitable for investment.
  • A pooled fund will be ineligible if any of the underlying holdings are exposed to the manufacture or distribution of controversial weapons, the provision of elective abortion, the manufacture and distribution of sole purpose abortifacients, or the production of pornography.
  • A pooled fund will be ineligible if 10% or more of the underlying capital value in aggregate is devoted to ethical issues prescribed in our published levels of tolerance.
  • Where we discover ethical issues, Epworth will seek to influence the fund manager.
  • Epworth will consider prior to investment the extent to which a cost-effective and quick exit on ethical grounds could be made should it be required. This will include both the Fund’s frequency of dealing points and powers of deferment and the liquidity of the fund’s underlying investments.

Monitoring

  • Before any investment we will review the ethical approach used by a manager.
  • Prior to investment, Epworth will review the underlying holdings in a pooled fund.
  • A review of a pooled funds underlying holdings will take place twice annually, and appropriate recommendations made to Epworth’s investment team.
  • Where appropriate, an engagement plan will be made after each review. A significant event, such as a war, natural disaster, or major ethics breach, may trigger an immediate review.

Governance

  • All third-party funds must be approved by the Epworth Responsible Investment Management Group (ERIM) before investment.
  • ERIM will be responsible for ongoing monitoring and reporting.