Video transcript

Selina: I'm Selena Zhang from Australian ethical and joining me today are our domestic equities portfolio managers, Andy Gracey and Deana Mitchell, thank you for joining me both. Andy, the Australian Shares Fund has an outstanding 30 year track record of outperformance. What are the ingredients to ethical outperformance?

Andy: We’re super proud of our investment performance over 30 years, beating both our benchmark and also beating an ASX 300 index, which is a board based ASX index. In terms of how we've done that, we've had a consistent ethical screening process that pushes us towards information technology, healthcare, transition orientated sectors, and it pushes us away from extractive type industries. It pushes us away from gaming, alcohol type industries, and it pushes us increasingly into small caps. The Australian Shares Fund has consistently invested in names like Cochlear, like Fisher & Paykel Healthcare, like ResMed. And these have been very successful Australian companies that have started out as emerging and small companies, and today are ASX 100 companies.

Selina: 30 years is a long time. Andy, could you tell me a little bit about your journey over that time and how you've seen the fund evolve?

Andy: Look, I've been there for 20 of those 30 years. I've been managing the Australian Shares Fund for just over 16 years. Things have changed over that period, the market has got a lot bigger and there's more opportunities for us to invest in this space, as companies are more open to ESG principles and more open to sustainability. I'm handing over the reins to Deana this month, and I'm sure she'll do very well.

Selina: Deana, tech was a top contributor of returns last quarter and for the 2024 financial year, and has been a feature of our fund historically. How do you see the growth of the local tech sector rewarding our investors into the future?

Deana: Technology has been a key outperformer for the fund, both over shorter- and longer-term periods. And if I think about the success we've had with investing in technology companies, there are some common attributes. So firstly, we're looking for companies with strong management teams. We're also looking for companies that are self-funding or have a disciplined pathway to get to cash flow break even. And lastly, the software needs to have a compelling business user case, and that will create a large addressable market for which users can adopt the technology. And we think if you can find companies with these ingredients at an attractive valuation, then these are the ingredients to successful investments. An examples of that are companies like Nuix, Gentrack and Bravura. We can also see traits of these companies in some of our other name investments such as SiteMinder and Eroad.

Selina: And Deana, what global megatrends do you see playing out in this portfolio?

Deana: Although we are very stock specific in our approach with portfolio construction, there are probably some key thematics across the portfolio. The first one is technology and efficiency. The second one is the global transition. So, investing in companies that play a role in the decarbonisation journey, so that can be anywhere from companies like a lithium company like Pilbara, and also renewables companies in Contact Energy and Meridian, for example. The third way is looking at future building industries with higher growth potential. So that includes data centres with Macquarie Technology and even biotech companies such as Immutep. And finally, is the aging and healthcare thematic. So that includes companies like Opthea, ResMed and Cochlear. So investing in these future focused companies offers a superior growth profile, and our history has demonstrated we've been able to generate that outperformance both over the long-term and we are seeing it in our short home results as well.

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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.

The information in this video is of a general nature and is not intended to provide you with financial advice or take into account your personal objectives, financial situation or needs. Before acting on the information, consider its appropriateness to your circumstances and read the Financial Services Guide, relevant product disclosure statement and Target Market Determination available on our website.

You may wish to seek financial advice from an authorised tax or financial adviser before making an investment decision. Past performance is not a reliable indicator of future performance.