Video transcript

Emma: Hi John, can you just tell us a bit about the last quarter and its impact on our portfolios?

John: Look, the last quarter was a more typical period for markets. But the beginning of April has been highly unusual, as the tariffs began to impact, across lots of asset classes. Equity markets peaked in late February and then really began to decline as there was more news around Trump's tariffs. And we were defensively positioned, so our portfolios, particularly our international equities portfolios, benefited from, weakening Australian dollar and strengthening foreign currencies. And our bonds, while yields probably haven't declined as much as we would have expected in this environment, still offset some of those negative returns.

Emma: So, John, our Ethical Charter guides us to invest quite differently. Does that change our level of exposure to current world events?

John: Indeed. Our ethical charter guides us away from a few key areas. So the energy sector, for instance, oil companies. We have very limited exposure to the energy sector. And energy tends to be hit, very significantly when growth slows down. Fast fashion. So fast fashion has been an area that's been impacted, particularly by the tariffs, because the tariffs have been proposed to be quite high in areas like Vietnam but we don't invest in companies like Nike. The material sector. Today the highest tariffs are on China. But our charter guides us away ffrom investing in some of those big Australian miners like BHP and Rio.

Emma: So John how are you positioning your portfolios to actually cope with the volatile markets?

John: Look we position our portfolios around three key areas. The first is diversification. We really lean into diversification, tackling the full breadth of opportunities that are available to us, including an extensive private markets allocation. The second area is valuation discipline. Our valuation discipline helps us to reduce risk at the top of the market and really sift through those opportunities that have emerged and market disruption like this. And thirdly, we do active fixed income. Active fixed income means we're taking a macro approach to identifying the best points in the yield curve, which has been highly disrupted through this environment.

Emma: Bit of a challenge, John. It's hard to tell, but what do you think the future might hold?

John: Look, it's always difficult to predict the future and with the current White House administration, it's even more challenging. But if I step back for a moment, equity valuations are more attractive than they have been in recent history. Bond valuations are more attractive than they have been in recent history. Australian Ethical has been investing this way for the last 40 years, and we've seen these markets before, and that's often been our time to shine. At moments like these, it gives us an opportunity to deploy capital into the areas that we think need it most and that tends to be where the greatest opportunities lie.

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Interests in the Australian Ethical Managed Funds are issued by Australian Ethical Investment Ltd (ABN 47 003 188 930, AFSL 229949), the Responsible Entity of the Australian Ethical Managed Funds.

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