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Australian Shares Fund update

General
commentary highlights

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Fund commentary

The Australian Shares portfolio has delivered outstanding performance as at 30 June 2021, consistently outperforming its benchmark over the medium to long term.

In keeping with the Ethical Charter, the Fund’s largest sector positions typically align with forward looking parts of the economy in areas where the team has deep domain expertise. Pleasingly several of these sectors made significant contributions to outperformance; specifically healthcare, information technology and utilities.

 

Australian Shares Fund (Wholesale) Performance as at 30 June 2021*

The Australian Shares Fund (Wholesale) outperformed its benchmark over 1, 3, 5-year periods ending 30 June. Over the past year, it returned 43.1% compared to 28.5% for the composite benchmark*, generating outperformance of 14.6%.

 

1 Year
(%)

3 Years
(% pa)

5 Years
(% pa)

10 Years
(% pa)

Since inception
(% pa)

Fund

43.1

17.3

14.9

n/a

16.1

Benchmark*

28.5

8.0

10.0

n/a

10.9

Source: FE fundinfo.
*Benchmark is composite S&P/ASX Small Industrials Accumulations Index till 12 August 2019 and S&P/ ASX 300 Accumulation Index thereafter. Past performance is not a reliable indicator of future performance.

 

Australian Shares Fund (Retail) Performance as at 30 June 2021*

The Australian Shares Fund (Retail) outperformed its benchmark over 1, 3, 5 and 10-year periods ending 30 June 2021. Over the past year it returned 41.9% compared to 28.5% for the composite benchmark* S&P ASX 300 Accumulation Index, generating outperformance of 13.4%.

 

1 Year
(%)

3 Years
(% pa)

5 Years
(% pa)

10 Years
(% pa)

Since inception
(% pa)

Fund

41.9

16.2

13.6

13.1

10.6

Benchmark*

28.5

8.0

10.0

9.6

7.5

Source: FE fundinfo.
*Benchmark is composite S&P/ASX Small Industrials Accumulations Index till 12 August 2019 and S&P/ ASX 300 Accumulation Index thereafter. Past performance is not a reliable indicator of future performance.

Relative to peers in the Mercer Wholesale Equity Australian all cap (Core) Universe (82 funds) and the Mercer Retail-Equity - Australia - All Cap (Core) Universe (38 funds), both the Wholesale and Retail funds delivered top quartile performance across numerous time periods ending 30 June 2021.

 

Quartile rankings as at 30 June^

 

3 months

1 Year

3 Years

5 Years

10 Years

Australian Shares (Wholesale) Fund

1st quartile

1st quartile

1st quartile

1st quartile

n/a

Australian Shares Fund (Retail)

1st quartile

1st quartile

1st quartile

1st quartile

1st quartile

Source: MercerInsights as at 30 June 2021. Past performance is not a reliable indicator of future performance.

Top contributors

Within healthcare, key contributors included Cogstate, whose cognition testing platform benefited from developments in new potential treatments for Alzheimer’s disease. Also contributing was Immutep, an emerging biotech in immunotherapy and Healius from a re-rating of their core diagnostics business.

Within information technology, key contributors included Nitro (PDF and e-signature business), Bigtincan (software as-a-service sales enablement) and Empired (technology services). Empired has subsequently entered into a Scheme Implementation Agreement (post year end) in relation to an acquisition of the company leading to further substantial share price appreciation.

Other notable Fund contributors included Pilbara Minerals (lithium and tantalum producer), Resimac (non-bank lender) and Vocus (fibre and network solutions provider subject to a takeover).

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Detractors

The Fund is typically underweight consumer discretionary names, which are often cyclical companies that don’t align with our ethical frameworks. This proved a modest headwind over the year as several businesses in this space held up better than market expectations during the COVID pandemic.

Other notable detractors included Cleanspace Technology and Fisher and Paykel Healthcare. Cleanspace was impacted after a sharper than expected deterioration in healthcare demand for their powered air purifiying respirators. In the case of Fisher and Paykel, the business gave back some its strong performance that was achieved due to COVID related demand for its oxygen high flow therapy.

Outlook

Despite pockets of valuation excess, we continue to find attractive opportunities, often in less well-researched parts of the market such as mid and smaller capitalisation companies.

We are cognisant of increased levels of corporate activity consistent with stimulatory policy settings and the positive implications for earnings assuming a successful rollout of effective vaccines against COVID. Our research efforts remain focused on identifying bottom up opportunities in areas of our established expertise and that align with our ethical frameworks.

Fund strategy

The Australian Shares Fund is an actively managed all-cap strategy investing in large, small and microcap companies listed on the ASX and NZX that meet our values-based Charter. We are a bottom-up investor using fundamental analysis with no change in fund strategy expected over the next 12 months.

Past performance is not a reliable indicator of future performance. Australian Ethical offers a diverse range of investment options depending on your investment objective, timeframe and risk profile. You can see the options and their respective performance here.

*Total returns are calculated using the sell (exit) price, net of management fees and gross of tax as if distributions of income have been reinvested at the actual distribution reinvestment price. The actual returns received by an investor will depend on the timing, buy and exit prices of individual transactions. Return of capital and the performance of your investment in the fund are not guaranteed. Past performance is not a reliable indicator of future performance. Figures showing a period of less than one year have not been adjusted to show an annual total return. Figures for periods of greater than one year are on a per annum compound basis. The current benchmark may not have been the benchmark over all periods shown in the above chart and tables. The calculation of the benchmark performance links the performance of previous benchmarks and the current benchmark over the relevant time periods.

^According to the Mercer Investment Performance Survey of the Wholesale-Equity - Australia - All Cap (Core) (Actual Ranking) and Mercer Investment Performance Survey of the Retail-Equity - Australia - All Cap (Core) (Actual Ranking) as at 30 June 2021. Information sourced from MercerInsights has been obtained from a range of third party sources. While the information is believed to be reliable, Mercer has not sought to verify it independently. As such, Mercer makes no representations or warranties as to the accuracy of the information presented and takes no responsibility or liability (including for indirect, consequential or incidental damages), for any error, omission or inaccuracy in the data supplied by any third party.

This commentary may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, Australian Ethical accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material.

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