Fund spotlight: Montanaro Better World

Montanaro Better World aims to tackle some of the world’s major problems through investing in small and mid-cap high-quality companies that make a positive impact on society, and that show sound ESG (environmental, social and governance) practices.

The fund is managed by the highly experienced manager and industry veteran Charles Montanaro whose company has become a recognised specialist in the small-cap space. He also has the support of co-manager Mark Rogers and the wider team at Montanaro Asset Management.

The team focuses on growing companies that are profitable and have strong business models. Using a variety of screening tools, the managers filter their investable universe to around 200 potential candidates.

What does it invest in?

The fund has a rather concentrated portfolio of around 50 stocks, but its global approach provides diversified revenue streams and themes.

Its largest allocation is to the US (43%), where the managers find most of their investment opportunities. Other exposures include Japan (8%), Australia (6%) and the UK (6%). On a sector level, the fund’s top allocations include healthcare (37%), information technology (28%) and industrials (16%). All figures are to the end of October.

Among its top holdings are SolarEdge, a provider of power optimiser, solar inverter and monitoring systems (4.1% weighting) and Veeva, a life sciences cloud computing company (2.9%).

Why we like this fund’s ethical approach

Montanaro Better World sits within the ‘Embraces’ ACE Category, meaning the fund adopts a targeted approach to ethical investing in its aim to make a positive impact. The team follows six impact themes: environmental protection, green economy, healthcare, innovative technology, nutrition and well-being, each of which support the United Nations’ Sustainable Development Goals. In 2015, the UN set 17 goals seeking to address the world’s biggest challenges and all countries are aiming to achieve them by 2030.

The fund actively excludes companies with material revenue exposure in areas such as: the manufacturing or supply of weapons, tobacco, gambling, adult entertainment, alcohol, and oil and coal (exploration and production).

Performance

Since the fund launched in April 2018, it has delivered strong performance in excess of its MSCI World SMID benchmark. The fund has returned 53.5% versus 26.9% for the benchmark, to 25 November 2020.

The fund has seen large inflows so far this year of more than £157 million, resulting in the fund size reaching nearly £550 million.

Montanaro performance chart (Nov 2020)

Source: Morningstar

Why we recommend it?

Montanaro Better World is included on the ACE 40 as a global equities, smaller company option.

The fund is managed by a highly experienced manger within a specialist firm in the small- and medium-sized company space, renowned for its large team of analysts and high-quality small-cap research and follows an investment process that Montanaro Asset Management have been guided by long before the launch of the fund in 2018.

Along with its strong investment process within a global mandate and aim to make an impact over the long term, the fund offers access to some exciting and meaningful companies. As the portfolio may look very different from its peers and performance could substantially deviate from its benchmark, the fund is likely to appeal to investors with a longer investment horizon and high-risk tolerance in seeking sustainable growth.

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Better World Fund

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Protecting the environment

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megawatt hours of energy saved

A low-carbon economy

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energy saving actuators fitted

Healthcare

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patients treated for illness or disease

Innovative technology

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electronic payments processed

Nutrition

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people given access to healthier foods each day

Wellbeing

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seat belts and airbags manufactured

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