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The investment management company, Morphic Ethical Equities Fund Limited (ASX:MEC) is from Diversified Financials group of industries. The company is headquartered in NSW, Australia and was founded in 2012. The Responsible Investment Association of Australasia has certified MECâs units Morphic Global Opportunities Fund and Morphic Ethical Equities Fund as good investment options for the investors. The company practices exclusion from direct investments in any entity like coal and uranium mining, oil and gas, armaments and such that are engaged in the destruction of ecology.
As per companyâs release on 18 February 2019, Net Tangible Assets (NTA) before tax stood at $1.1001 and after tax stood at $1.0839.Â
Business Performance
The Fund rose 3.2% (in AUD) in January, trailing global markets for the month (4.2% in AUD) which rallied 7.8% in USD terms. Heavily oversold in December, markets in January rose on the back of hope for a looser monetary policy coupled with positive expectations for the China-US trade war negotiations. All regions posted strong returns with Emerging Markets being the best performer during the month (+8.7%).
The largest detractor for the month was its position in rail equipment manufacturer Alstom on fears that the merger with Siemens Mobility might be blocked by the European competition authorities. Alstom had continued to exceed expectations in terms of sales growth and margin expansion, with a record 5-year order book. While it expected the share price to be volatile in the short term, it believed Alstom to remain attractively valued with or without the merger.
On the positive side, the companyâs most significant contributor was the position in freight forwarder Panalpina. In November, the company announced that its non-independent Chairman would step down in 2019. The largest shareholder (45%) had previously used this position to block any discussion of the takeover, and MEC judged that the companyâs valuation did not reflect the new probability of it. Pairing the holding with short positions in other peers rewarded it when DSV recently announced a takeover approach at a significant premium to the market valuation.
Outlook
The companyâs half-year report ending 31 December 2018, expressed cautious optimism in early January 2019 that markets had over-reacted in December and should rally. After the largest rally in January in 30 years, it believed markets are likely to enter a more difficult directionless range as some data in the background such as earning revisions and growth expectations had slowed over the last four months. Historically, a Federal Reserve that went on hold and stopped hiking, was positive for equities, but the reason they were on hold was a double-edged sword: if worsening data got too bad, there was a risk of recession and equities donât rise in that situation. The company remained of the view that was not the case but tempered its bullish stance with some cash being raised at the margin in the company.
The fund closed at A$0.930 (as at 22 February 2019), up by 3.333% on ASX. Though fund has yielded negative return of 17.05% over last six months, but it has offered a positive YTD return of 4.65% till date.
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