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 long-term growth by investing in small capitalisation companies that meet the Australian Ethical Charter.

Investment strategy

The opportunity to invest in a diversified portfolio of shares in small capitalisation companies on the basis of their social, environmental and financial credentials. The Fund utilises an active stock-picking management style with stocks selected for growth rather than income. All stocks are chosen on the basis of relative value where we deem the risks are being adequately priced.

Performance

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Annualised performance

1m3m6m1y3y5y10ySince inception
Fund3.3%10.6%22.4%24.8%14.5%--16.9%
Benchmark3.3%3.9%9.5%6.9%9.1%--11.5%

Calendar performance

CY 2018CY 2017CY 2016CY 2015CY 2014
Fund-1.8%12.3%10.9%--
Benchmark-6.5%15.7%6.2%--

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
%
Healius Limited
3.5%
Contact Energy Limited
3.2%
Infigen Energy
3.1%
Bigtincan Holdings Ltd
3.0%
GBST Holdings Ltd
3.0%
EROAD Limited
2.9%
Janison Education Group Ltd.
2.7%
Macquarie Telecom Group Limited
2.6%
Rhipe Limited
2.6%
Capitol Health Limited
2.6%

Commentary

The Emerging Companies Fund had an excellent September quarter, returning 10.4% (10.6% for the wholesale fund) compared to its benchmark which returned 3.9%. The fund’s 12-month performance was also very strong, having returned 24.2% (24.7 Wholesale Fund) against the benchmark’s 6.9% advance.

Equity markets continued their positive momentum with lower interest rates driving shares prices upwards while America/China trade negotiations kept markets in check. The standout sectoral performances in the fund were healthcare, financials and information technology.

The strongest individual stock performer was again health imaging software company Mach7 Technologies, which appreciated 27% with little new information. Other strong contributors included drug developer Opthea, which appreciated 400% after announcing a successful Phase 2 clinical trial in age-related macular degeneration. We were pleased with the price recovery of mortgage broking aggregator Australian Finance Group, which generated a 43.4% return over the quarter after avoiding serious regulatory backlash from the Royal Commission.

We welcomed wind generator Infigen Energy’s gain of 43% as investors welcomed the increasingly contracted nature of their energy portfolio and the company’s ability to firm up third-party renewable energy production. Another strong portfolio contributor was broking and wealth management software company GBST (+29%) which benefited from takeover activity.