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BT Wholesale Ethical Share Fund
BT Wholesale Ethical Share Fund
BT Wholesale Ethical Share Fund Fact Sheet August 2009 ARSN: 096 328 219 About the Fund Performance The BT Wholesale Ethical Share Fund is an actively managed portfolio of (%) Total Returns Benchmark Australian shares that seeks to ensure that funds are invested in an ethical (post-fee) (pre-fee) Return or socially responsible manner. Investors are becoming increasingly aware 1 month 6.34 6.42 6.64 of the link between a company’s sustainability focus and its long term success and profitability. As a result, ethical fund investing combines the 3 months 16.65 16.94 19.00 best of both worlds – the potential to achieve strong performance over the FYDT 13.56 13.74 14.47 long term while contributing to a sustainable environment. 6 months 32.47 33.11 37.92 Fund objective 1 year (pa) -8.86 -7.99 -8.04 The Fund aims to provide a return (before fees) that exceeds the 2 years (pa) -10.74 -9.89 -11.33 S&P/ASX300 Accumulation Index over the medium to long term (5+ years). 3 years (pa) 0.93 1.86 0.04 Investment approach 5 years (pa) 11.77 12.81 9.40 The Fund will not invest in companies which: directly mine uranium for the purpose of weapons manufacture produce alcohol or tobacco Asset allocation manufacture or provide gaming facilities Energy 10.8% manufacture weapons and armaments Materials 23.9% have been subject to environmental and/or human rights Industrials 7.0% prosecutions Consumer Discretionary 3.6% Investment process Consumer Staples 4.3% The Fund uses the same investment process as BTIM’s flagship Australian Health Care 3.7% equities products with the addition of sustainability screens. Telecommunication Services 5.5% 1. The negative screen effectively determines the investment universe of Utilities 0.6% the BT Wholesale Ethical Share Fund Financials ex Property Trusts 33.1% 2. The positive screen identifies companies for active consideration, given Property Trusts 4.6% their focus on the production of sustainable goods and services. The ethical screen is provided by Monash Sustainability Enterprises (MSE), a Cash & Other 2.8% leading independent research organisation. Examples of positively Top 10 holdings screened companies include those that derive greater than 20% of their BHP Billiton Limited 10.9% revenue from sustainable technologies, products and services. Westpac Banking Corporation 7.5% Investment team National Australia Bank Limited 6.9% BTIM’s nine-member Australian large-cap equities team is one of the Telstra Corporation Limited 5.6% largest in the industry. The portfolio manager for the Fund is Jack Chemello, Commonwealth Bank of Australia who has more than 11 years industry experience. 5.3% Limited Investment guidelines ANZ Banking Group Limited 4.9% Ex-ante (forward looking) tracking error 2.0% - 6.0% Metcash Trading Limited 4.4% Min/max stock position +/-4% Rio Tinto Limited 3.8% Min/max sector position +/-6% QBE Insurance Group Limited 3.5% Number of stocks 50-90 AMP Limited 2.9% Fees Other information Management fee 0.95% pa* Fund size (as at 31 Aug 2009) $197 million Date of inception May 2001 Minimum investment $50,000 BT Investment Management (RE) Limited ABN 17 126 390 627, Minimum balance $50,000 AFSL 316 455, has been certified by RIAA according to the strict Buy-sell spread 0.50% disclosure practices required under the Responsible Investment Certification Program. The Certification Symbol signifies that an Income distribution frequency Quarterly investment product or service takes environmental, social, ethical or governance considerations into account along with financial returns. APIR code RFA0025AU See www.responsibleinvestment.org for details. * You should refer to the latest Product Disclosure Statement for full details of fees and other costs you may be charged. Market Overview An overweight in Sonic Healthcare was another contributor to returns The Australian equity market performed strongly in August, up 6.6% in August. Its result was also better than expectations as they continue and marking six consecutive months of gains. Global sharemarkets to extract cost savings from the integration of bolt on acquisitions in the continued to rally against an improved macro backdrop and with German and US markets. Not holding Wesfarmers and Woolworths, investors increasingly convinced that the worst of the financial excluded stocks, also contributed to portoflio performance in August. downturn is over. Australian economic data was also supportive with Strategy & Outlook improving consumer and business confidence. The drivers of the positive market sentiment remain in place. Firstly, The reporting season was the main driver of market returns in August the developed economies have seen a stabilisation of growth after with earnings delivery generally better than the low expectations, down what was an unprecedented free fall at the beginning of the year. only 19% on last year. In addition a number of companies flagged that Secondly, the Chinese economy is accelerating, which is driving better operating conditions were showing signs of improvement. Asian growth and demand for commodities. Finally, the extremely Financials (+12.1%) were the standout sector in August, with all sub loose monetary policy is generating surplus liquidity which is finding its sectors: real estate, banks, insurance and diversified financials way into investment markets. outperforming the market. This reflected signs that the loan loss cycle These factors are driving a self-reinforcing rally in markets with the for banks was nearing a nexus and also better than expected results higher prices enabling more capital raisings which in turn facilitate from AMP and QBE. Industrials also performed well during the month bond issuance – all of which enables companies to de-risk their (+9.4%) reflecting the improvement in the domestic economy being balance sheets. The situation in Australia is even more constructive reflected in outlook statement of companies such as Qantas and Toll. with the emerging boom in China fuelling strong commodity prices and The Resources sector underperformed the rising market, being only improving the terms of trade as well as supporting new investment. flat for the month. This was driven by lacklustre results reflecting the The fiscal stimulus has supported the retail sector and the rise in difficult operating conditions experienced in recent months and unemployment has not been as dramatic as feared. This is feeding cautionary comments from BHP and Rio on the outlook for Chinese through into evidence that housing prices are beginning to rise again. commodity buying, with suggestions that the phase of inventory build Reporting season provided more evidence that the underlying was coming to an end. operating environment was improving particularly for domestically exposed companies. Telcos also detracted from market returns over the month, (-7.1%), mainly due to the Future Fund selling down its holding in Telstra. The key themes that emerged from the reporting season were: Clear signs that operating conditions had stabilised and in some Capital raisings continued through August with Amcor ($1.6bn), cases that they were showing signs of tentatively improving. Goodman Group ($1.1bn) and Boart Longyear ($756m) among the Substantial write-offs due to a combination of write downs on main ones. property, inventory and goodwill plus restructuring costs. In other economic news, the RBA left its cash rate on hold at 3.0% and Stronger balance sheets, reflecting the raising of equity and the Australian dollar consolidated recent gains to finish at 83.7c, hitting terming out of debt through bond issues. This was enabling a 10 month high over the month. Consumer and business confidence companies to take a more medium term approach to running the indices both improved in July, reflecting the fact that the rise in business as compared to last February. unemployment appears to be far more muted than expected. Improved cash flow due to a greater focus on working capital. Fund Performance Overall the outcome was positive in that it demonstrates a clearing of The portfolio finished marginally behind its benchmark over the month the decks preparing companies for the potential upturn. Herein lies the of August though achieved strong positive returns in absolute terms on key issue, the pace and duration of any recovery. It is clear the level of the back of a successful reporting season and positive economic data. policy medicine has been so overwhelming that it has revived the Our position in Rio detracted from performance, due to the patient. While this medicine continues to be administered it is likely that fundamentals for the resource sector beginning to turn down in August. the world economy will continue to be on a path for recovery and Firstly, the spot price of iron ore and steel in China began to fall liquidity will remain strong. Australia will benefit in a more concentrated reflecting over supply of product. Secondly, there was evidence that way, given its leverage to the strong Chinese economy and resource the build up of inventory in China was coming to an end, this was prices. This is most evident in the level of investment in the commodity reflected in a stalling of the rise in base metal prices. Finally, there sector, notably some of the large scale LNG projects which have were increasing concerns that the Chinese government was taking recently been announced. The risk to investors is what happens once policy measures to slow the rate of stimulus to the economy. the policy medicine starts to be withdrawn, particularly now market Our overall position to resources is underweight reflecting our valuations are pricing in some recovery. The early signs of policy concerns that the sector faces some headwinds. This is reflected in our conservatism were met with a sharp sell off in the volatile Chinese underweight position in BHP and in the pure plays. In August we did stock market, but a timely warning of the fragility of financial markets. see smaller resource stocks buck this trend, rising due to further For the time being we are of the view that policy makers are far more investments by the Chinese into Australian companies with concerned about triggering a second slowdown than they are of development assets such as Aquila Resources. We are wary of dealing with the widening fiscal deficits and will err on the side of valuations in a number of these stocks given an easing in the stimulating for longer. This should support markets in the near term, underlying fundamentals. but the risks remain that policy makers lose control of the situation. Our overweight position in Metcash also detracted from performance Our portfolios are being positioned in a way to capture the benefits of over the month as the defensive Consumer staples sector cyclicals where we see strong medium term fundamentals supporting underperformed the market. Our overweight in Telstra was another the company beyond the immediate recovery in the economy. Stocks detractor as the stock traded down over the month on the back of the such as Asciano, NAB and Worley fit this criteria, all of which now have Future Fund selling part of its holding in the company. strong balance sheets as well as good cash flow. In addition we are targeting other longer term themes such as the development of LNG The portfolio’s overweight position in QBE was one of the main reserves with companies such as Origin and Oil Search. Finally we see contributors to returns as the stock rallied strongly after it reported value in certain companies which have demonstrated an ability to better than expected results. The outlook for premiums is positive as consolidate their industry to produce higher returns, such as Sonic the industry remains capital constrained. In addition their recent Healthcare and QBE. acquisitions have performed well, re-enforcing their credentials as disciplined and timely buyers of assets. For more information Please call 1800 813 886, contact your business development representative or visit www.btim.com.au BT Investment Management (RE) Limited ABN 17 126 390 627, AFSL 316 455, is the responsible entity and issuer of units in the BT Wholesale Ethical Share Fund. A product disclosure statement (PDS) is available for the Fund and can be obtained by contacting your business development representative on 1800 813 886 or visiting www.btim.com.au. You should obtain and consider the PDS before deciding whether to acquire, continue to hold or dispose of units in the Fund. This information has been prepared without taking account of your objectives, financial situation or needs. Before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. An investment in the Fund is not a deposit with or any other liability of the Westpac Banking Corporation (ABN 33 007 457 141) or any other Company in the Westpac Group of companies. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the (post-fee) performance. Past performance is not a reliable indicator of future performance. BT Investment Management (RE) Limited is a member of the Westpac Group. Neither BT Investment Management (RE) Limited, nor any other company in the Westpac Group, guarantees the repayment of capital or the performance of the product or any particular rate of return. BT® is a registered trade mark of BT Financial Group Pty Ltd and is used under licence.
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