30 September 2019

Australian Ethical is one of Australia's leading ethical fund managers. By investing responsibly in well-managed ethical companies, we deliver competitive financial performance to our clients and positive change to society and the environment. Since our inception in 1986, our Ethical Charter has guided all investment decisions and underpinned our business practices. Every year 10 per cent of our profits* are distributed to charitable organisations and social impact initiatives through The Australian Ethical Foundation.

Investment objective

To provide exposure to primarily Australian fixed interest securities that support the Australian Ethical Charter, generating income with some capital growth potential over the medium to long term.

Investment strategy

The opportunity to invest in a diversified portfolio of interest-bearing investments generating income. The Fund is invested in primarily fixed rate bonds, from issuers such as the Commonwealth and State Governments, banks and other corporate issuers that meet the Australian Ethical Charter.

Performance

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Annualised performance

1m3m6m1y3y5y10ySince inception
Fund-0.5%1.9%4.8%10.6%4.0%4.7%-5.0%
Benchmark-0.5%2.0%5.1%11.1%4.6%5.3%-5.6%

Calendar performance

CY 2018CY 2017CY 2016CY 2015CY 2014
Fund4.0%3.2%2.1%2.1%-
Benchmark4.5%3.7%2.9%2.6%-

Why invest ethically?

Portfolio diversification: Diversify your portfolio by investing in companies and sectors not well covered by other fund managers and brokers.

Help build a better world: Invest in the new, low‐carbon economy, fund medical and technology breakthroughs, efficient transport and more.

Promote human rights: We strive to avoid any investment in companies involved in the poor treatment of asylum seekers or the exploitation of workers through poor working conditions.

Current top 10

Description
%
Australian Government Bond
51.5%
Queensland Treasury Corporation
8.2%
New South Wales Treasury Corporation
5.7%
Western Australia Treasury Corporation
4.5%
Treasury Corporation of Victoria
3.9%
Kreditanstalt Fuer Wier
2.2%
South Australian Financing Authority
1.8%
European Investment Bank
1.6%
Landwirtschaftliche Rentenbank
1.3%
National Australia Bank Limited
1.3%

Commentary

The Australian Ethical Fixed Interest Fund returned 1.7% (1.9% for the wholesale fund) for the September quarter, slightly behind the benchmark index which returned 2.0% over the quarter.

The fund held a neutral duration through the September quarter relative to that of the Bloomberg Ausbond Composite Bond Index 0+. Declines in long bond yields pushed fixed income returns higher over July and August. The RBA delivered a rate cut in July, and markets continued to price in more central bank support action both domestically and in other developed markets. After starting the quarter at 1.32%, the Australian 10-year yield declined as much as 0.54% to a historic low of 0.88%. However, September saw the global decline in yields reverse on hopes of calming US/China trade relations as a resumption of trade talks in October was announced.

Domestic markets continue to expect further support to come from the RBA, with many in the market now looking to what other measures they could potentially employ to support the economy as the cash rate approaches zero, with unconvential measures expected to be applied if the cash rate reaches 0.5%. The RBA’s guidance is that it would not expect to see upward pressure on inflation without full employment. The fund remains in a neutral duration position.