The economic effects of Covid-19 have been masked with Government stimulus, Central Bank liquidity injections, policy changes and debt forgiveness or deferral. We note the following:
- Directors obligations diminished: through temporary amendments to the Corporations Act with respect to continuous disclosure (which potentially weakens having an informed market); a six month holiday on laws around insolvent trading; ATO reportedly deferring payment notices to companies.
- Capital raisings hastened: ASX listing rules changed to increase size and speed of raisings.
- RBA liquidity: to cap rates in the bond market and provision of cheap funding to banks.
- Industry:direct support for the property and building industry.
- One off superannuation withdrawals: ~ $15bn.
- JobKeeper:~ 3.5 million workers and $70bn in wages support.
- JobSeeker:~ 1 million people with increased benefits.
- Loan deferrals: ~ $230bn of loan deferrals from both business and households.
- Rent deferrals: residential and commercial tenants.
The above have led to a stock market environment that is currently assuming no lasting effects of the Covid-19 pandemic and instead puts a lot of faith in the above measures to see us through. But many of these measures are slated to come to an end in the fourth quarter of 2020 where we believe the cash flow impacts will manifest for households and business. Despite the implication from rising share prices that all is well, we believe there are some companies that will face cash flow issues.
See attached for the full report.
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.