We are pleased to report that since it became clearer six months ago that the economic cycle was normalising and a global recovery was underway, the Fund has generated a +20% return, outperforming the broader market by around 2%. We believe this has been achieved by taking only moderate and manageable risks, as we have discussed in previous Investment Reports.
While the Australian equity market continues to post strong monthly returns, fragilities are starting to emerge as equity and bond markets are in the midst of trying to work out whether:
1. There is a strong global economic recovery occurring or whether delays in vaccine rollouts or second or third wave COVID-19 strains will cause delays;
2. The Fed is serious about not intervening in the rapidly rising bond yield situation and if inflation will actually arrive and;
3. The easy monetary conditions of the past few years has led to inherent risk taking that is now threatening to unwind, starting with the first major hedge fund and finance house bankruptcies, even while we are in the midst of a bull market.
Informed by our observations, mostly from our interactions with individual companies, we believe that an economic recovery is coming led by improving demand. But it won’t be pervasive and may well see long delays for some sectors. It is also likely that there has been excess risk built up in a system of easy money and an effective “Fed Put” having been assumed by markets for many years. We see central banks as having little choice but to continue to preach no intervention lest they inadvertently and prematurely overturn a fragile restoration of growth.
Full Report attached
While the response to climate change risk by regulators, financial institutions and publicly listed companies is welcome, it currently is not enough to ensure a safe climate. This submission provides a comprehensive assessment of the current risks relating to Australia's key export sectors.
It is estimated that 100 pairs of hands touch your clothes before they arrive in your wardrobe. That’s 100 people at risk of modern slavery, poor working conditions, and exploitation. Ethical Partners has recently signed the Investor Statement in Support of the maintenance and expansion of the Bangladesh Accord.
Globally, 15% of the population are persons with disabilities. The labor force participation rate globally for people with disabilities sits at 32.8% compared to 77.1% for those without disabilities. We believe it is imperative that investors use their shareholder voice to raise the awareness of this important diversity issue and help companies to improve their inclusion.
During February 2021 the Fund returned -0.08% versus the S&P/ASX 300 Accumulation Index of 1.48%, underperforming the market by -1.55%. An overweight position in Consumer Staples and an underweight position in Healthcare contributed to relative performance while an overweight position in Utilities and an underweight position in Materials detracted from relative performance.