We have expanded this category to account for the growing interest in investments that provide strong returns but also support companies taking a more moral or ethical-based approach. Last year we chose global equity and European equity ETFs that screen companies based on their social responsibility scores, and in 2018 we have added a new ETF that weights companies based on their commitment to gender equality.
New list
UBS ETF – MSCI World Socially Responsible UCITS ETF (UC44)
UBS’s ETF was unanimously voted back into our Top 50 ETFs list following its inclusion last year. UC44 tracks the MSCI World Socially Responsible index, which excludes companies that have a negative social or environmental record and impact, and then weights companies according to their positive ratings. It currently includes 408 stocks out of the 1,648 in the parent MSCI World index, and has marginally outperformed over the long term. The UBS product has garnered support amassing £480m in assets. Nonetheless, its bid/offer spread is high, due to big pension funds allocating but not trading very often, so it is worthwhile trying to buy into this ETF when markets are calm, but if it’s a long-term holding this will matter less.
UBS ETF – MSCI EMU Socially Responsible UCITS ETF (UB39)
Also voted back onto the list, this ETF mirrors the same exclusion and positive weighting strategy as its global equity counterpart but is vastly more concentrated in Europe, with the MSCI EMU SRI index only including 60 stocks compared with 248 in the wider MSCI EMU index. Nonetheless, the product is strongly supported and both UB39 and the MSCI EMI SRI index have outperformed the MSCI EMU index in the past five years. The ETF carries an ongoing charge of 0.28 per cent and has assets of £577m. However, it faces similar trading costs to its global counterpart, so this is worth bearing in mind. The panel particularly liked UBS’s strategy here and rated it for having the longest track record in socially-responsible ETFs, and for teaming up with MSCI for the screening policy – which both removes stocks and then positively weights to stocks, doubling the focus on good companies.
NEW: Lyxor Global Gender Equality ETF (GEND)
Countless studies have proved that companies with a focus on gender equality and diversity are better long-term stewards of shareholders’ capital and so this ETF from Lyxor came highly recommended by the panel. GEND provides broad exposure to global equities, but with a bias towards companies that lead on gender diversity. It equally weights its 150 constituents, so it has a mid-cap tilt. It tracks the Solactive Equileap Global Gender Equality index, which screens companies based on board-level gender diversity, workforce, equal opportunities, parental benefits and pay. It keeps its exposure limited to 50 per cent in the US and 10 per cent in any other single country. It tracks global equities well, but has underperformed slightly since launch.
To view the IC Top 50 ETFs 2018 by category, please click on the links below:
Emerging market equities (four ETFs)
NEW: Sterling corporate bonds (two ETFs)
NEW: Global bonds (three ETFs)
Commodities and precious metals (three ETFs)
