The fund will invest in about 50 companies from a range screened by the Ethical Investment Research Service. The fund will avoid investing in any company, activity or regime that has a significant involvement in the arms industry, production of alcohol, tobacco, gambling, pornography, the abuse of people and animals and harming the environment.
The majority of the fund, 80 per cent, will be invested in UK company shares, while 20 per cent will be invested overseas.
Dick Eats, HTR managing director, believes this is a good moment to launch a fund of this type because the fall in the UK stock market last year means there is good value to be had.
Mr Eats said: "We have been considering the launch of an ethical fund for some time and believe that the stock market conditions are now right, after the setbacks of 1994. A number of investment advisers now specialise in this area and an increasing number are regularly asked about ethical products by their clients."
The charges on the fund are in line with the industry average - 5.25 per cent initially plus 1.25 per cent annually. Minimum investment is £1,000, or £2,000 in the personal equity plan. A savings plan is available for £50 per month. The fund aims to pay an initial yield of 3.5 per cent.
The companies that it will invest in include Tesco, Marks & Spencer, Body Shop, and Halma, which makes safety devices for industry.
Anyone who wants to invest ethically has 24 funds to choose from - either investment trusts or unit trusts. The sector has two types of fund to choose from - those that are "ethical" and those that are "green".
Ethical funds tend to invest using exclusion criteria - they will not invest in companies because of what they do or make. Green funds tend to invest in companies that are doing something positive for the environment - for example, producing something that cleans up toxic emissions.
The performance of funds in this sector is very mixed. All are predominantly invested in the UK and, in common with most UK unit and investment trusts, the ethical and green funds fell in value last year.
On average, those investing in the green or ethical sector at the beginning of last year would have lost 11 per cent of their money. Charges would have added a further 5 per cent or so on average to this loss. The average UK fund fell by about the same amount last year.
Eiris is used by many of the ethical fund managers to screen companies for their eligibility for investment. From time to time, it will drop companies off its list.
For example, last year Body Shop was embroiled in controversy because of allegations published in an American magazine. Eiris reviewed its eligibility for investment, but it remained on the list.
Individual fund managers themselves may take a particular stand on a company. Jupiter Tyndall, one of the best-known of the green fund managers, stopped investing in Tesco last year because it was using greenfield sites for building new shops It was later reinstated after it changed its policy.
The top-performing fund over both one year and five years in this sector has been the Eagle Star Environmental Opportunities unit trust. Eagle Star said it achieved this performance through aggressive stock selection.
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