I cannot quite believe its December. Heading into Christmas and reflecting on the year that was, it can be confidently said, it was one like no other! This year we saw our world turn upside down with the unimaginable coming to the fore. We’ve seen the full gamut of external factors impact Global markets, including raging bushfires, a deadly pandemic, never-before-seen stimulus packages, trade wars and an election that tested the Democratic system of the United States.
Before I begin with this year’s review, I’d like to acknowledge those who have worked tirelessly throughout this year for the benefit of our society — nurses, doctors, police, defence forces, and of course, our firefighters who helped us manage our first crisis of this year, the bushfires.
As we have all managed the significant challenges and pressures COVID-19 has placed upon us, we cannot ignore that we as a country are very fortunate to have managed this crisis relatively well. Moreover, this crisis has certainty provided each of us with some timely lessons: to cherish the physical times we have with loved ones, enjoy our social connections, and to embrace our lives outdoors. Cafes and conference rooms were replaced by the disquiet of working from home, separated from our colleagues and families as we all complied with social distancing.
Businesses needed to adapt to survive — gin distilleries became hand sanitiser producers, event staging manufacturers built flat-pack office desks, and nearly every service organisation implemented a work from home program. Five years’ worth of technology adoption occurred within weeks as businesses worked out new ways of connecting staff and customers, we created discussion channels on Slack and attended board meetings with our pets. However, something was missing: the face-to-face interaction, mentoring and interaction that occurs within the office environment.
For business leaders, these items have become the next challenge for those who need to engage with their teams and provide purpose and a sense of community when normal social interactions are not possible. To ensure business success through these times, leaders need to ensure their companies adopt change-orientated capabilities that help firms redeploy and reconfigure their resource base while ensuring they remain responsible to all stakeholders.
From a top-down perspective, the Australian economy entered recession in the March quarter for the first time in 28 years — a notable achievement that few countries can boast about. In the June quarter, the economy contracted by 7 per cent — the biggest fall in activity since the end of World War II, with the cash rate currently standing at a record low of 0.1 per cent. The Australian dollar is near US74.3 cents, unemployment stands at 7.0 per cent, and annual inflation is 0.7 per cent, excellent results by any measure.
The ASX 200 hit a record high on February 20 at 7162.5 points, collapsing by 37.5 per cent over the next 22 days before lifting by 21 per cent over the next sixteen days and currently stands at 6642.58 up around 0.6% over the year. By comparison, our portfolios increased by more than 20% over the same period.
For ECP, it has been an exciting year with outstanding performance, the award of several new institutional mandates and a number of favourable ratings from various agencies. This year’s performance is, without doubt, part skill and part luck — but as Gary Player famously said, “The more I practice, the luckier I get”. This year’s pandemic has presented ECP with many challenges, whether operationally or by way of investments, and in both cases, I am proud to say that all our team members have stood up to the task and were able to navigate these troubled waters.
As long-term business owners, we don’t expect much turnover of ideas in our portfolio, with a number of our investments reaching a holding period of over ten years. With that said, during the year we added Audinate, IDP Education, Lifestyle Communities, and Lovisa. Notably, despite the numerous IPOs offered this year, Nuix is the only IPO in which we decided to be a cornerstone investor. To create our high-performing portfolio, we need to be capable of thinking methodically and discerningly, and this is particularly pronounced when considering new offerings.
We recently hosted all our staff for the strategy offsite to review and discuss the evolution of our business. This year, with growing creditability amongst our peers, our strategy session focused on the next phase of our business growth, and for me, this will be the most exciting stage of our company’s evolution. We aspire to be seen as a firm that has contributed to the wealth of our clients and their members and the transparency and accountability of our industry. I believe this next phase of our evolution will be the one in which we do that.
Our beliefs and our process guide everything we do. We are a highly ethical team, committed to good investing. We are relentlessly transparent, honest about our capacity and vigilant in applying our process. We do this because there is simply no other way we can deliver on our promises. We encourage and promote a culture of respect and support for all members of our team where their new ideas, different perspectives and skills are respected and recognised.
Our culture is ultimately one of trust. Our company’s values and behaviours are aligned with our people and our clients. It is important to us that all our customers understand why we make the investment decisions that we do and that we inform our clients in the simplest, most digestible way possible. At ECP, we strive to make a meaningful difference by facilitating and ensuring, long term sustainable wealth creation for our clients and we do this through our purpose to Redefine Active Investing.
From the entire investment team, we wish you and your families a very Merry Christmas and a happy and healthy New Year. We sincerely hope 2021 is a more normal time for everyone. As the year draws to a close, I wanted to thank you all for your ongoing support.
The article has been prepared by ECP Asset Management Pty Ltd (ECP). ECP is a funds management firm based in Sydney, Australia. For further information, visit www.ecpam.com. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial advice. ECP and the analyst own shares in IDP Education. ABN 26 158 827 582, AFSL 421704, CAR 44198.
