New fund out; Booster in

Booster Financial Services has stumped up $400 million in assets to help launch a new international fund that excludes the tobacco, controversial weapons and nuclear weapons sectors.

Friday, December 16th 2016, 7:45AM 2 Comments

by Owen Poland

David Beattie

Booster Chief Investment Officer and Joint CEO, David Beattie, says the company will  switch all of its current core international shares investments into the new Vanguard fund on behalf of investors in its KiwiSaver, Superannuation and Investment products.

Managed by Vanguard Australia, the Vanguard International Shares Select Exclusions Index Fund tracks the MSCI World ex Australia ex Tobacco ex Controversial Weapons ex Nuclear Weapons Index, providing investors with exposure to more than 1500 listed companies across 20 developed international markets excluding Australia.

The new fund has been specifically designed to address recent concerns about indirect exposure to controversial companies included in the standard Vanguard International Shares Index Fund. However Beattie says it's important to clarify that the new fund should not be labelled as ‘ethical’ or ‘socially responsible’.

Whilst it excludes investments in companies associated with controversial weapons, such as the manufacture of cluster bombs, landmines and nuclear weapons, it will continue to include investments in a range of civilian and military weapons which a true ‘ethical’ or ‘socially responsible’ investment fund would normally filter out.

"Somebody going into this fund needs to be very aware that is what they're investing in, and anyone who loosely uses the word ethical might potentially be misleading them as to what it doesn't exclude and they need to make that very clear."

The new fund was also designed to achieve a balance between addressing investor concerns without compromising investor returns. "The more you start excluding things, the more expensive these things tend to get" says Beattie, who points out that fully ethical SRI funds have a different tracking performance because they typically remove around 20 per cent of the World Index.

"We needed to exclude the very ones that generally the great populace have a strong aversion to, but be careful you don't go too far and make sure you've got a particular clear alternative option for those who want to take that further."

Booster's $400m investment represents around 20 per cent of its $2 billion of funds under management which reinforces that it's not just an index follower. "It's a core satellite approach, as opposed to being just pure index, and a number of providers out there are just index followers" says Beattie, adding that "we believe that we can do a better job for members of the fund by having an active component."

Tags: Booster responsible investing Vanguard

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Comments from our readers

On 16 December 2016 at 9:08 am Brent Sheather said:
I have a question for Booster. Can Booster advise what fee Vanguard is charging and how this compares to the total expense ratio of the Booster Socially Responsible High Growth Fund. Given the difference in fees where does Booster add value? Also does Booster pay commission or trailing fees to advisors and if so what are these fees?
On 16 December 2016 at 11:57 am R1 said:
Surely, if the fund is "designed to address recent concerns about indirect exposure to controversial companies included in the standard Vanguard International Shares Index Fund" it would also excludes banks which have been fined for fraudulent activities (i.e. most major banks). If not, why not? Given banks are major investors I can extrapolate to the likely answer to this question.

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