Pendal Ethical Share aims to provide a return (before fees, costs and taxes) that exceeds the S&P/ASX 300 Accumulation Index over the medium to long term. This Fund is designed for investors who want the potential for long-term capital growth and tax effective income, diversification across a broad range of Australian companies and industries and are prepared to accept higher variability of returns. The Fund may also hold cash and may use derivatives.
The Fund underperformed the benchmark over the month of December.
Contributors
Overweight
Fortescue Metals Iron ore miners, Fortescue Metals (FMG, +11.5%) continued to rise on the back of the strong iron ore price – seaborne iron ore surpassed US$160/mt over the month, a price level that was last seen in 2011. End-of-year restocking, as well as concerns that recommendations on the government inquest into the Juukan Gorge incident may have some impact on supply.
Overweight Xero
Our preferred tech name, Xero (XRO, +10.8%) continued to rise on the back of a good set of results released in November. While new subscriber growth softened in the US and UK, in line with expectations given the challenges in attracting new customers during the Covid period, there was stronger than expected subscriber growth in Australia and New Zealand. Given these are highly penetrated markets, this may suggest a further post-Covid shift in mentality towards the importance of online cloud-based accounting. Overall, we believe XRO’s growth is a function of several macro and secular drivers combined with solid execution.
Detractors
Do not hold BHP
Iron ore miners, including BHP (+11.5%) continued to rise on the back of the strong iron ore price – seaborne iron ore surpassed US$160/mt over the month, a price level that was last seen in 2011. End-of-year restocking, as well as concerns that recommendations on the government inquest into the Juukan Gorge incident may have some impact on supply.
Overweight Qantas
Qantas (QAN, -9.9%) gave up some recent gains in December. It provided an update which was encouraging, with domestic capacity set to ramp up to 80% of pre-Covid levels. Debt was a little higher than expected. However there was a lot of focus on the enterprise value (EV), which is returning to pre-Covid levels, potentially prompting some profit-taking from investors who bought it as a recovery play. In our view, this misses the impact of a large return of working capital, which is likely to drive the EV higher. We see more upside from current levels.
What is Pendal Ethical Share Pendal Ethical Share is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Cap Neutral Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Pendal Ethical Share has Assets Under Management of 213.65 M with a management fee of 0.95%, a performance fee of 0.00% and a buy/sell spread fee of 0.5%.
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