30 September 2020

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 long-term growth through investment in listed companies on Australian and international stock exchanges that meet the Australian Ethical Charter. A small number of shares which fail to meet the charter may be purchased from time to time to allow advocacy activities to progress. These additional shares will not materially affect the Fund's investment returns.

Investment strategy

The opportunity to invest in a diversified share portfolio of Australian and international companies, which meet the Australian Ethical Charter. Generally, all Australian and New Zealand investments will have a market capitalisation greater than the 200th ranked stock listed on the ASX. As an advocacy fund, one of the main purposes of the Fund is to engage directly with companies to pursue improved corporate behaviours in line with the Australian Ethical Charter.

Performance

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Annualised performance

1m3m6m1y3y5y10ySince inception
Fund-2.4%1.0%14.1%-5.7%6.2%7.0%8.2%8.3%
Benchmark-2.8%0.6%14.5%-6.5%5.7%7.3%8.1%7.8%

Calendar performance

CY 2019CY 2018CY 2017CY 2016CY 2015
Fund22.7%-3.1%12.0%5.9%6.2%
Benchmark24.7%-2.8%10.2%7.1%9.0%

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‚Äźcarbon 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
%
CSL LIMITED
1.9%
WESTPAC BANKING CORPORATION ORD F/PD SHARES
1.9%
NATIONAL AUSTRALIA BANK
1.9%
CONTACT ENERGY LTD
1.6%
GOODMAN GROUP
1.6%
TELSTRA CORPORATION LTD
1.5%
XERO LTD
1.4%
BRAMBLES LIMITED ORDINARY FULLY PAID
1.3%
RESMED INC
1.3%
Dexus
1.3%

Commentary

The Advocacy Fund increased 1.0% (1.3% Wholesale Fund) over the September quarter relative to its benchmark, which increased 0.7%, resulting in outperformance of 0.4% (0.7% Wholesale Fund). The domestic equities portfolio of the Fund (approximately 75% of the total fund) increased by 1.32% for the September quarter versus its benchmark ASX 200 which declined 0.44%, resulting in outperformance of 1.76% (before fees). The international portfolio underperformed its benchmark, returning 2.25% versus 3.78%.

The Australian market started the quarter strongly, with August particularly strong (ASX 200 up 2.2%) boosted by some better-than-expected earnings in the reporting season, solid economic data and renewed hopes for a vaccine. However, September saw the five-month rally end with the ASX 200 falling 4% as investors became nervous about fears of a second global COVID-19 wave, poor sentiment regarding the US Presidential election and growth concerns. Locally, the effects of the lockdown in Victoria became more apparent, with a higher level of unemployment and Federal Treasurer Josh Frydenberg warning the Australian economy was set to contract by 6% more than forecast by the end of 2021.

In the domestic portfolio, the sectors contributing most of the performance were Energy, Utilities and IT. Energy provided the best performance as the sector underperformed (due to a fall in the oil price in September) and the Fund does not hold energy stocks. IT stocks continued their strong performance, mirroring the strong performance of the US IT stocks. The sector that detracted from performance was Materials, due to the good performance of the mining stocks which the Fund does not own.