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Fund commentary
The Australian Shares funds (Wholesale & Retail) continued to deliver strong performance, outperforming over the September quarter, as well as medium and long-term periods.
Outperformance over the September quarter can be attributed to the strong performance of the fund's holdings in small/micro companies and the Communication Services and Healthcare sectors.
The Healthcare and Communication Services sectors, along with Information Technology and Utilities Sectors, are core areas of exposure in line with our Ethical Charter.
Both the Wholesale and Retail funds outperformed their benchmarks over time periods of three months and greater, and also delivered top quartile performance relative to peers across numerous time periods ending 30 September 2021.
Over the quarter, the portfolio actively added new holdings while exiting positions where valuations were stretched. Three new holdings were introduced over the September quarter, which were:
- consumer discretionary goods owner and distributor McPhersons
- governance, risk and compliance (GRC) software company Nuix
- Rubicon Water which has appreciated over 70% since its Initial Public Offering (IPO) in early August.
Investing in sustainable water management
The sustainable use of water resources is essential for healthy ecosystems and the wellbeing of our planet, people and animals.
One of the newest holdings in the portfolio is a water technology business called Rubicon Water Limited (ASX:RWL), which designs, manufactures, installs and maintains irrigations systems, including software and hardware, for agricultural purposes.
Rubicon listed on the Australian share market in August 2021 but the company itself has been around since 1995. It produces gravity-fed irrigation systems, as well as automation software to enable irrigation using less time, effort and water. The company has some very large installations in India, USA, China and Chili, giving it exposure to growth opportunities in large markets. Currently, half of its revenues are generated offshore.
There are few opportunities to invest in water-related companies on the Australian share market. This investment represents an attractive opportunity to participate in the growth of a company helping manage one of the world’s most precious resources.
Australian Shares Fund (Wholesale) Performance as at 30 September 2021*
|
|
3 Months |
1 Year |
3 Years |
5 Years |
Since inception |
|
Fund |
6.3 |
39.1 |
18.3 |
14.5 |
16.4 |
|
Benchmark |
1.8 |
30.9 |
7.5 |
8.6 |
10.8 |
Source: FE fundinfo. Benchmark is the S&P/ASX300 Accumulation Index and the fund's inception date is 23 January 2012. Past performance is not a reliable indicator of future performance.
Australian Shares Fund (Retail) Performance as at 30 SEPTEMBER 2021*
|
|
3 Months |
1 Year |
3 Years |
5 Years |
Since inception |
|
Fund |
6.2 |
38.0 |
17.3 |
13.2 |
10.8 |
|
Benchmark |
1.8 |
30.9 |
7.5 |
8.6 |
7.5 |
Source: FE fundinfo. Benchmark is the S&P/ASX300 Accumulation Index and the fund's inception date is 19 September 1994. Past performance is not a reliable indicator of future performance.
Relative to peers in the Mercer Wholesale Equity Australian all cap (Core) Universe (81 funds) and the Mercer Retail-Equity - Australia - All Cap (Core) Universe (37 funds), both the Wholesale and Retail funds delivered top quartile performance across every applicable time period ending 30 September 2021.
QUARTILE RANKINGS AS AT 30 SEPTEMBER 2021^
|
|
3 months |
1 Year |
3 Years |
5 Years |
10 Years |
|
Australian Shares (Wholesale) Fund |
1st |
1st quartile |
1st quartile |
1st quartile |
n/a |
|
Australian Shares Fund (Retail) |
1st |
1st quartile |
1st quartile |
1st quartile |
1st |
Source: MercerInsights as at 30 September 2021. Past performance is not a reliable indicator of future performance.
Contributors
Data centre owner and operator Macquarie Telecom was again the number one contributor, appreciating 53% as the market re-values its rapidly growing Sydney data centre capacity.
The second best contributor was contract research organisation Cogstate which appreciated 62% on growing appreciation of the FDA approval of Biogen’s disease modifying Alzheimer’s drug ‘Adulelm’ as well as a strengthening order book in Cogstate's core neurological contract research business. The strong share price appreciation is attributed to Cogstate owning one of the leading global digital cognition tests which is expected to benefit from ongoing testing associated with the prescription of Biogen’s drug Adulelm, plus other Alzheimer’s drugs close to approval.
Our long-standing investment in IT systems integrator Empired appreciated 51% after it announced it was being taken over by French company Capgemini for $1.35/share, a considerable premium to where it was trading.
Detractors
The performance of wealth management and fund administration software provider Bravura fell 12%, which retracted earlier gains on what appears to be further delays in the recovery of its business driven by a sluggish UK software buying market.
Mortgage provider Resimac which provides mortgages to the self-employed funded via securitisation programs fell 17% on fears of pressure in their net interest margin as interest rates rise. Education technology provider 3PL the owner of Mathletics and Reading Eggs slipped 8% on little or no new information. While metals recycler, Sims metal management, fell 20% after the headline price of iron ore almost halved resulting in a fall in scrap metal prices.
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.
SEE FUND INFO*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) Universe and the Retail-Equity - Australia - All Cap (Core) Universe as at 30 September 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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