During February 2020 the Ethical Partners Australian Share Fund returned -6.89% versus the S&P/ASX 300 Accumulation Index of -7.76%, outperforming the market by 0.88%(after fees). Over the last quarter the Fund benefited from underweight positions in Property and Materials. Key detractors over the last quarter included an overweight position in both Financials and Consumer Discretionary an underweight position in Healthcare.
Ethical Partners’investment process continues to be focused on investing in sound businesses at conservative valuations. As a consequence of this around 40% of the companies currently in the portfolio have net cash balance sheets (or close to), all are producing solid cash flows and all are conservatively valued on an earnings (not sales)multiple or have a valuation based on hard assets. As a result we have not had to change the way we think about stocks or our portfolio positioning in response to equities markets selling off.
Owning interests in well run businesses that produce solid cash flows has stood the portfolio in good stead. It means that we have options during market volatility and are not holding companies that rely on equities markets to be orderly for them to be well financed. Knowing our companies well means that we can selectively add to existing positions or find new holdings during market volatility.
During December 2020 the Fund returned 2.11% versus the S&P/ASX 300 Accumulation Index of 1.32%, outperforming the market by 0.79% (after fees). Overweight positions in Renewable Energy and Transition Commodities and an underweight position in Healthcare contributed to relative performance while an overweight position in Food Products and an underweight position in Information Technology detracted from relative performance.
Ethical Partners has made a submission to to the inquiry on the Climate Change Bill. In our view it is clear that we desperately need whole of government support around the important elements of this bill.
Biodiversity is a very important area of engagement for us at EPFM, and an area of increasing interest for investors. Experts believe that we are in the midst of the Earth’s sixth mass extinction event -some 75 per cent of terrestrial and 66 per cent of marine environments have already been severely altered by human activity and one million species face extinction – many within decades.
During October 2020 the Fund returned 2.85% versus the S&P/ASX 300 Accumulation Index of 1.89%, outperforming the market by 0.96% (after fees). Overweight positions in Insurance stocks and an underweight position in Metals & Mining contributed to relative performance while overweight positions in Consumer Staples and Media & Entertainment detracted from relative performance.