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Quitting tobacco is not so easy for investors as sticking to ‘ethical’ stocks can be difficult

AXA’S insurance arm is to stop backing tobacco firms.

The company, the world’s biggest health insurer, said that as a healthcare provider, investing in the sector made no sense

But how many of its customers even knew the firm had around £1.6billion tied up in tobacco?

It’s worth pointing out, of course, that the move does not affect the fund management side of Axa’s business – just the money invested by its insurance arm.

Axa fund managers are still free to invest in whichever companies they believe will deliver the best returns for savers.

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And many of those could include companies which manufacture and sell cigarettes and other tobacco products.

The Axa Framlington UK Growth fund, for example, has 3.6 per cent of its money in Imperial Tobacco. These businesses have been some of the most successful investments for savers over recent years.

The addictive nature of the customers of tobacco companies means the firms have been able to steadily grow their share price as well as pay a chunky dividend.

Over the past ten years, British American Tobacco shares have more than tripled from 1358p to 4182p.

That would have turned a £10,000 investment into £30,795. Imperial Brands has grown from 1670p to 3769p in that time.

Many savers may not like the idea of profiting from businesses which are making money selling this type of product.

But as some of the biggest firms in the FTSE 100 they are among the most common to be found in investment funds.

Savers have the option to pick an ethical fund, which can screen out all companies which profit from tobacco, arms or pornography, for example. But many people don’t want a blanket ban on anything ‘bad’.

So-called sin stocks, like it or not, have been incredibly successful investments over the years and ruling them out entirely could impact on your returns.

So is it possible to quit tobacco stocks without opting out of UK funds? Data provided by Hargreaves Lansdown shows that very few UK funds do not invest in the sector.

The Lindsell Train UK Equity fund is one of them. It looks for firms which will outperform over the long term.

Some 22 per cent of the £2.1billion fund is in financial services companies, including London Stock Exchange Group, and a further 22 per cent in beverage businesses such as Heineken and Diageo. It has returned 90 per cent over the past five years.

The Unicorn UK Smaller Companies fund has 15 per cent of its cash in industrial engineering businesses, 11.5 per cent in support services, and 11 per cent in construction companies. The fund has returned 76.1 per cent over the past five years.

The Unicorn UK Income and F&C Mid Cap funds also don’t include tobacco in their holdings.

Finding this information is quite difficult though.

Funds publish a full list of their investments as little as once a year, and some contain hundreds of companies, many of which you might never have heard of, which makes checking and comparing an arduous task.

And if you pick a fund on this basis it is important to remember that it is not part of the strategy of these funds to avoid tobacco, it is just what their investment choices happen to be.

So if avoiding the sector is important to you it is vital to regularly check for any changes. Of course, many savers won’t be concerned about tobacco. But perhaps they are worried about other sectors.

Franklin UK Smaller Companies has no oil companies or tobacco firms in its portfolio. Standard Life UK Equity Income Unconstrained has no oil or pharma stocks.

Adam Laird, investment manager at Hargreaves Lansdown, says: ‘Ethics is a personal subject and each saver will approach it differently – one person’s renewable wind energy is another’s blot on the landscape.’

Whatever your ethics, it’s crucial you check a fund before you hand over your savings to ensure you understand where your money is going.

Did you know, for example, that the £8billion Woodford Equity Income fund has 16.6 per cent of its cash in tobacco stocks? It also has 23.8 per cent in pharmaceutical firms.

Invesco Perpetual UK Growth has 19.7 per cent of its money in oil and gas companies, while the Liontrust Macro UK Growth fund has 18.7 per cent of its assets in pharmaceuticals.

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