Ethical Investment July 24 Report
Dear Investor,
I am pleased to announce the release of our July 2024 Monthly Report for our Funds. The ELMRI ANZ Conviction Fund increased by 1.2% and the ELM Responsible Investments Global Fund increased by 2.6%. Both funds underperformed its benchmark.
Market Outlook
Despite recent market volatility, our funds have delivered strong performance over the long term, and we believe our portfolios are well-positioned for continued growth. Current macroeconomic conditions are increasingly favourable, with expectations that interest rates in the U.S. may begin to decline as early as September. This environment, characterised by decreasing inflation and interest rates, aligns well with our investment approach and should provide a positive long-term impact on our portfolios.
The increased volatility in August has been driven by heightened geopolitical risks and data indicating a weakening macroeconomic environment. As a result, market strategists have raised the likelihood of a recession, causing concern among investors. However, our investments are focused on secular growth areas such as renewable energy, healthcare, and digitisation, which are resilient even in a softer economic climate. This recent volatility has also created opportunities for us to increase our investments in key holdings.
ELMRI ANZ Conviction Fund Outperforms Traditional and Ethical Benchmarks
Our ELMRI ANZ Conviction Fund is approaching the 5 year mark (inception date is 11th October 2019), which is our minimum investment time horizon, and we are proud to report that it is outperforming both our traditional and ethical benchmarks, showing that we can achieve both our investment and sustainability goals. We are confident that our Global Fund, which only launched in 2021 will also enjoy the same level of success as it approaches the minimum investment time horizon.
Key Positions
Key positions in the ELMRI ANZ Conviction Fund are ProMedicus, Xero, CSL, Fisher & Paykel Healthcare and ResMed. Key positions in the ELM Responsible Investments Global Fund are Tesla, ServiceNow, Microsoft, ASML and NVIDIA.
ELMRI in the AFR: Our Views on Renewable Energy Investment in the Current Political Climate
With As the 2024 U.S. presidential election approaches, concerns are mounting in the investment community, particularly in the ESG (Environmental, Social, and Governance) sector. The possibility of Donald Trump's return to the White House has led many to anticipate a rollback of environmental policies, similar to those he initiated during his first term. This prospect is causing fund managers to reassess their positions, especially in green energy and climate-related investments, which have already been underperforming in recent years.
While a Republican presidency might increase fossil fuel usage, it is unlikely to derail the broader energy transition. Much of the job creation from the Inflation Reduction Act (IRA) has occurred in Republican-leaning states, making it uncertain whether Trump would dismantle these initiatives. Additionally, with Kamala Harris now gaining on Trump in the polls, the outcome of the election remains uncertain, and this political volatility must be considered.
Despite recent challenges, including higher development costs and interest rates, renewable energy investments are now well positioned, particularly as macroeconomic conditions start to become more favourable.
The full Australian Financial Review article can be found HERE.
Company News: Intuitive Surgical
Intuitive Surgical released its Q2 2024 results, showing a 14% increase in company revenue to US$2.01 billion compared to US$1.76 billion in Q2 2023. This growth was largely driven by a 17% rise in worldwide procedures utilising the da Vinci Surgical Systems, an advanced robotic platform that enhances surgeons' capabilities for performing complex minimally invasive surgeries.
The company placed 341 new da Vinci systems during the quarter, including 70 of the latest da Vinci 5 models, resulting in a total installed base of 9,203 systems as of June 30, 2024—an impressive 14% increase year-over-year. The da Vinci Surgical System enables surgeons to conduct intricate procedures through small incisions, significantly improving patient outcomes by reducing recovery times and minimising complications.
By providing superior precision, dexterity, and control, these systems facilitate a wide range of surgical specialties, including urology, gynecology, and general surgery.
The continued adoption and expansion of Intuitive Surgical’s technologies reflect its commitment to advancing surgical practices and improving access to cutting-edge medical treatments globally.
Company News: ASML
ASML released its Q2 2024 results, with total net sales of €6.2 billion, exceeding expectations and reaching the high end of their guidance. This strong performance was primarily driven by increased sales of immersion systems, which are advanced lithography tools essential for the production of smaller, more powerful semiconductor chips. This growth contributed to an impressive gross margin of 51.5%, reflecting ASML’s operational efficiency and pricing power in a competitive market.
ASML's outlook remains optimistic, with Q3 2024 net sales projected between €6.7 billion and €7.3 billion, maintaining a robust gross margin between 50% and 51%. The company's quarterly net bookings of €5.6 billion, including €2.5 billion in EUV systems, demonstrates the sustained demand for ASML's advanced semiconductor manufacturing equipment.
As a key enabler of technological progress, ASML's performance not only demonstrates its financial strength but also highlights its crucial role in driving positive change through improved computing capabilities and energy efficiency in electronic devices.
Conclusion
We are committed to investing in the most innovative and impactful growth companies and I am optimistic about the future potential of our investment strategies.
If you wish to discuss any aspect of this report in greater detail, please do not hesitate to reach out. I would be more than happy to arrange a meeting at your convenience. Those interested in investing with us can explore our investment portal and review our fund documentation by clicking the "Invest Now" buttons provided below.
Thank you for your ongoing interest and support.
Kind regards,
Jai Mirchandani
ELM Responsible Investments Global Fund
ELMRI ANZ Conviction Fund
This note has been prepared by ELM Responsible Investments (‘ELMRI’) ABN 70 607 177 711 AFSL 520428, for Australian wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Cth).
The information is not intended for general distribution or publication and must be retained in a confidential manner. Information contained herein consists of confidential proprietary information constituting the sole property of ELMRI and its investment activities; its use is restricted accordingly.
This note is for general informational purposes only and does not purport to be comprehensive or to give advice. The views expressed are the views of the writer at the time of preparation and presenting and all forecasts, assumptions, opinions, data and other information are not warranted as to accuracy or completeness and are subject to change without notice. This is not an offer document and does not constitute an offer or invitation of investment recommendation to distribute or purchase securities, shares, units or other interests to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this note. Any potential investor should consider their own circumstances and seek professional advice.
ELMRI funds, its directors, employees, representatives and associates may have an interest in the named securities.
Past performance is for illustrative purposes only and is not indicative of future performance.