Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Two strategies focused on a better future
The demand from investors for “sustainable” investment products has doubled in the past two years. There are now so many options available for investors to choose from, it can be difficult to choose the right product that aligns with one’s sustainability goals. If you aren’t sure what stocks to buy, a good way to gain meaningful exposure to this sector is through the use of managed funds. For this article, we’ve listed two managed funds that we think will give good portfolio exposure to sustainable investing.
Nanuk New World Fund
Nanuk’s New World fund has been around since 2015 and invests in global equities exposed to the broad theme of environmental sustainability and resource efficiency. The fund uses positive (inclusionary) screening, and negative (exclusionary) screening, together with ESG filters, to help select stocks that meet the UN’s Sustainable Development Goals (SDGs). The fund excludes any companies that have exposure to armaments, gambling, human rights abuses, labour rights violations, nuclear power, pornography and tobacco. It includes companies that have exposure to education, “green” property, healthcare and medical products, renewable energy and energy efficiency, social and sustainable infrastructure, sustainable land and agricultural management, sustainable transport and sustainable water.
The fund invests in companies that benefit from, or contribute to, improving global environmental sustainability and resource efficiency. The fund says its “approach is primarily bottom-up and focused on identifying stocks that Nanuk considers mispriced and then constructing well-diversified portfolios of such opportunities.”
Last month’s performance was negatively impacted by the fund’s underweight exposure to the Energy (Oil & Gas) sector which outperformed significantly during the month and cost inflation and supply chain disruption arising from the Ukraine crisis. The fund opened two new positions: Carrier Global Corp (NYSE:CARR) and Kone Oyj (HEL:KNEBV).
Nanuk says “CARR is a leading provider of building efficiency solutions focused on heating, ventilation and air conditioning (HVAC) and fire & safety. It also offers vehicle refrigeration. Carrier is benefitting from increased investment in building energy efficiency and indoor air quality and increasingly sophisticated building management systems. The fund previously held a position in Carrier that had performed strongly and was exited in early December 2021, since which time the stock has underperformed and it now offers more attractive return potential.”
Kone Oyj (HEL:KNEBV) – Is listed on the Nasdaq Helsinki and is a global elevator and escalator business. It offers elevators, escalators, and automatic building doors. Nanuk says, “providing solutions to improve the efficiency of people flows with buildings and the urban environment. The company stands to benefit from increasing renovation rates aimed at modernising and improving the efficiency of the existing building stock.”
Here is the Nanuk New World portfolio as at the end of March 2022
Australian Ethical Australian Shares Fund
Australian Ethical is one of Australia’s leading ethical fund managers. By investing responsibly in well-managed ethical companies, the fund delivers competitive financial performance and positive change to society and the environment. Every year, 10 per cent of profits are distributed to charitable organisations and social impact initiatives through The Australian Ethical Foundation. The opportunity to invest in a diversified share portfolio of companies predominantly listed on the ASX and selected on the basis of their social, environmental and financial credentials. The fund uses an active stock-picking management style with stocks generally selected for growth rather than income, with a bias towards smaller capitalisation stocks listed on the ASX.
In a similar fashion to the Nanuk New World fund, this fund also had a bumpy ride during March, mainly because of its underweight in the Materials and Energy sectors, which performed strongly on the back of the crisis in Ukraine. Despite this, Australian Ethical continues to be attracted to small companies believing they offer the most attractive risk/return equations over the medium to long term.
During March the fund added to existing holdings in payments company EML Payments (ASX:EML) and Nitro Software (ASX:NTO). EML shares crashed by 35 percent following the release of the company’s third-quarter result. Underpinning this result was the operating performance of the company’s European prepaid business which EML payments described as “significantly behind”. This business has been impacted by remediation activities which gave way share price weakness. Australian Ethical has added to its existing holdings because of this share price weakness.
Here are the top-10 holdings in the portfolio:
