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 investors with a balance between capital growth and a moderate level of income through a diversified portfolio of assets that supports the Australian Ethical Charter.

Investment strategy

The opportunity to invest in a diversified portfolio of asset types and markets to reduce the volatility of returns. Asset classes include Australian and international shares, property and fixed income securities.

Performance

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Annualised performance

1m3m6m1y3y5y10ySince inception
Fund0.7%2.9%7.8%10.4%7.8%7.7%6.9%6.8%
Benchmark1.1%3.1%8.5%10.2%9.7%8.9%8.6%7.6%

Calendar performance

CY 2018CY 2017CY 2016CY 2015CY 2014
Fund-0.8%8.1%4.2%6.9%9.7%
Benchmark1.2%8.9%6.3%7.4%10.1%

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
%
Investa Commercial Property Fund
4.5%
Healthcare Wholesale Property Trust
4.2%
Morrison & Co Growth Infrastructure Fund
1.4%
Westpac Banking Corporation
1.0%
Microsoft Corporation
1.0%
National Australia Bank Limited
0.9%
Government Of Australia 4.5% 15-apr-2020
0.9%
Government Of Australia 4.25% 21-apr-2026
0.8%
Government Of Australia 4.75% 21-apr-2027
0.8%
Government Of Australia 3.25% 21-apr-2029
0.7%

Commentary

The Balanced Fund returned 2.9% (3.2% for the wholesale fund) over the September quarter, underperforming the benchmark which returned 3.1%. The largest contributors to fund performance were the international and domestic equities portfolios which returned 4.3% and 3.9%, respectively. Globally equities markets performed well, with the US and Japan leading the way. In the US, the S&P 500 increased 5.8% while in Japan the Nikkei 225 increased by 6.9% over the quarter. Domestically the equities market was relatively subdued compared to other markets, with the S&P ASX 200 returning 2.4%, as concerns about Australia’s slowing economy weighed on investor sentiment.

While overall global market performance was strong there was significant volatility, particularly during August. Markets continued to be sensitive to political developments with regards to Brexit and trade tensions between the US and China.

Despite these concerns, the international equities portfolio posted positive performance across all sectors over the quarter. The biggest contributors to performance were utilities, which increased 13.1% over the quarter, and real estate, which increased 8.3%, as investors continue to chase yield and stability in a low-interest-rate and volatile environment. Consumer discretionary (which increased 6%), and consumer staples (which increased 5.4%) were also strong contributors as consumer sentiment in the US continued to show positive signs.

Domestically, the largest contributor to performance was stock selection in the communication services sector. While overall the sector declined by 3.2%, the fund’s holdings in the sector appreciated 5.3% driven in part by REA Group, which returned 13.4% over the quarter as sentiment around the housing market improved.

The fixed interest portfolio benefited from a further decline in bond yields, while the fund’s commercial property exposure benefited from further capital appreciation as the sector continues to be attractive for investors due to strong tenant demand and a low-yield environment.