We like companies that are in control of their own destiny, with a competitive advantage that can be sustained. In contrast, some of the sectors that have struggled (such as leisure and hospitality) have a higher asset base or a lower return model that requires the fast turnover of inventory. Such companies have struggled as their sales have been impacted by lockdown.
As long as they’re not dragged down by leveraged balance sheets, most of these businesses should continue in one form or another. This may not be true for all sectors – business travel (airlines, hotels and conference facilities) looks vulnerable if the step change in remote working and video conferencing continues once the pandemic is under control.
Our sustainable funds have performed strongly this year, both during the initial crisis and in the recovery. Sector positioning and active stock selection have been important. However, not everything has worked out. An example is CSL, an Australian biotech company that specialises in blood plasma proteins. It’s a great company and plasma therapies are being used in Covid-19 treatment – one would expect it to have had strong counter-cyclical qualities. In practice, the company has found it hard to operate as effectively in lockdown as it has become harder for people to donate blood.
Our sustainable funds are committed to investing in companies that are addressing the long-term challenges facing the world. Crucially, sustainable themes are longer duration. In a decade or two, when the current US Presidential election, Brexit and even Covid-19 are distant memories, themes such as energy transition, digitisation and the fourth industrial revolution will still be unfolding.
George Crowdy is co-manager of the Royal London Global Sustainable Equity Fund. Find out more about our range of sustainable funds at rlam.co.uk/sustainable
For professional clients only, not suitable for retail investors. The views expressed are the author’s own and do not constitute investment advice. Past performance is not a reliable indicator of future results. The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. Portfolio characteristics and holdings are subject to change without notice. This does not constitute an investment recommendation. For more information on the fund or the risks of investing, please refer to the fund factsheet, Prospectus or Key Investor Information Document (KIID), available via the relevant Fund Price page on www.rlam.co.uk
