With everything going on in the share market, we want to keep you as connected and informed as possible. To do this, we’ve launched Lunch Money webinars to help bring Sharesies to you!
Hosted by Sharesies’ co-founders Sonya Williams and Leighton Roberts, these webinars cover:
Sonya and Leighton’s views on what’s happening in the news, and what it means for investors
Questions from the crowd about money, investing, and Sharesies as a business
In this episode we had John Berry (CEO and Director of Pathfinder Asset Management) join the session to talk about ethical investing, KiwiSaver, and what’s happening in the world at the moment.
Watch the replay over on Crowdcast, or listen to/download the audio file below:
Since we didn’t get around to everyone’s questions today, John’s picked a few questions to answer here.
“Other than the feel-good factor, why should people invest in ethical investments when they don’t get dividends or immediate returns, and they can from other types of investments?”—Liz
Hi Liz, we don’t just invest ethically to feel good, we invest ethically to make great returns. An ethical approach for us starts with avoiding many harmful industries, like fossil fuels and tobacco—both have been terrible investments over the last 5 years (avoiding them has been really good financially). With Pathfinder and CareSaver, we also have a positive focus on what we see as ‘good’ companies. These consider risks from the impact of their business—for example, impacts on staff, the environment, supply chains and consumers who use their products. You’ll be familiar with lots of the companies we invest in, and you’ll see we like companies that pay dividends and generate positive returns. Locally, our holdings include Fisher & Paykel Healthcare, Spark, Pushpay, Meridian and Xero. Offshore, our investments include Microsoft, Adobe, Tesla and Alphabet (Google). We are here to make money from investing, but with an ethical approach. —John
“What are the returns like for ethical investment compared to non-ethical ones?”—Penny
Thanks Penny. We believe you should not have to sacrifice returns to be ethical—ethical investing should not come at a cost. There is plenty of data from Australasia and globally that shows this is true for investors. In fact, earlier this week the Wall Street Journal summed it up by saying “funds focused on socially responsible investing have been a rare bright spot in this year’s market meltdown.” Take our ethical KiwiSaver (CareSaver) Growth Fund over the last 6 months to 30 April, we have a small positive return of 0.20% compared to the KiwiSaver growth funds of the main banks which are all in negative territory. Investing ethically delivers. —John
“How can I find all companies that are within a particular fund? From the summaries provided by most fund managers, they just include the top 10 holdings.”—Matt
Matt, good question! Transparency of holdings for any fund you are invested in is important. Fund holdings for all managers are shown on a government website and updated twice a year (https://disclose-register.companiesoffice.govt.nz/), but this site is hard to navigate. For CareSaver we publish equity holdings on our website, for Pathfinder we provide full holdings to anyone who asks us. If you can’t find the list on a manager’s website, flick them an email asking for the full holdings. You should be able to see where your money is invested! —John
“I am still struggling to understand the exact role of a fund manager. Please explain!”—Chelsea
Hi Chelsea, a ‘fund’ is a legal entity formed to make investments (think of a fund as similar to a company, but it issues ‘units’ instead of ‘shares’, and it has a ‘supervisor’ instead of a ‘board’). Investors buy units in the fund and the fund uses this money to buy assets like shares in listed companies. Say 100 investors each buy 1 unit of $1 in a fund, then the fund has $100. Let’s say the fund invests this $100 into 5 different listed companies. If the listed company shares go up 10% in value overall, then the fund now has assets of $110. The value of each unit in the fund will go up to $1.10 (everyone has made 10% on their investment).
Anyone can withdraw from the fund, and anyone can join the fund, except the price for a unit is no longer $1, it is $1.10. That price change happens every day as the value of the fund’s investments change. The fund manager oversees the whole process—setting up the fund, defining what it will invest in, working with investors, and (the most important part) choosing the investments. That’s the long answer to your question—the short answer is a fund manager manages a fund! —John
“A lot of data centres use a lot of water. How is this aligned with the concept of 'ethical investing'? Or are you able to filter out only data centres that don't use a lot of water?”—Julie-Anne
Thanks Julie-Anne. We focus on investing in companies that care about their social and environmental impact. This includes, for example, their emissions, the resources they use, and their supply chains. Data centres have two big challenges. Firstly, the amount of energy they use, and secondly, the water they use for cooling. We can’t invest in a data centre that doesn’t use power or water, we can only work to find those that recognise the challenges and are leaders at becoming more efficient. In the case of power, this includes generating their own renewable energy. With water, this is about moving to re-use water or use re-cycled water (rather than fresh drinking water). But you are right—data storage is very resource-intensive; hungry for energy and thirsty for water. —John
“How does your fund respond to sudden market shocks such as the market crash in Feb 2020?”—Chris
Excellent question Chris, given listed equities (and particularly listed property) have had a bumpy ride this year. For both Pathfinder and CareSaver, we can take several steps in market turmoil. This includes switching to more defensive shares, reducing currency hedging (anticipating that the New Zealand dollar will fall), holding more cash, and even using derivative protection. March 2020, in particular, was brutal with the US market down around one third at one point. Our KiwiSaver (CareSaver) handled this well—based on data from Morningstar for January, February and March, we were the best growth fund (of 61 funds), the best Conservative fund (of 37) and second in the Balanced category (of 69). All our Pathfinder funds were down over January, February and March but ahead of their market indexes, meaning the steps we took helped. —John
What advice do you have for new investors?
When you start out as an investor, ask yourself lots of questions about every investment decision you make. If you are buying shares, ask why that company and that industry? Why now and not in 3 months time? Why do I think this is a good price? What investment time frame am I thinking about? And also really important, ask what could go wrong. This is important not just for buying, but also decisions for holding or selling. Asking yourself lots of questions will help you better understand your plan, identify risks, and ultimately make better decisions. —John
Thanks for joining us John! Register for the next Lunch Money webinar here, where we’ll be joined by Victoria Potarina, CEO of TruScreen, an NZX listed company that develops, manufactures, and sells cancer detection devices and systems.
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