4Plus Plan investor update Q2 2020

Gordon Kearney

by , Senior Portfolio Manager at State Street Global Advisors

13 Aug 2020 /  

number 4 in white text against a blue background

Hi, I’m Gordon Kearney from State Street Global Advisors, and I’m here to give you an update about the 4Plus Plan, which you are invested in.

How did the plan perform compared to the market, over the last three months? Did we have a good quarter or a bad quarter?

The global economy suffered from an unprecedented shock in March and April driven by government imposed lockdowns to contain the spread of the COVID-19 pandemic. Economic indicators collapsed globally during the first half of the quarter. The US alone lost over 20 million jobs in April with historic declines in retail sales, manufacturing and housing.

Policy makers responded in record time with massive, broad-based stimulus to support affected workers and businesses. Economic data in May indicates that the stimulus support and re-opening plans are working, and the economic recovery has begun.

Of course economic activity and stock market performance do not always align. Whilst economic activity showed modest signs of recovery, they remain well below levels seen at the beginning of the year. Stock markets on the other hand staged a strong recovery and at the end of June were in touching distance of all-time highs. In essence, stock markets were pricing in continued resilience in economic activity long into the future, underpinned by the various stimulus packages announced.

The 4Plus Plan captured a slice of this upside, returning just over 5% in the quarter. However we remained more balanced in our approach, conscious of the risks that remain and not quite sharing the same confidence as markets.

By de-risking and avoiding the worst of the fall out in March, the 4Plus Plan was able to navigate this year’s turbulence in a smoother manner and as at 30 June, remains ahead of stock markets on a year-to-date basis.

What can savers expect for the next quarter?

As we look out over the next number of months we are likely to experience more volatility than we have seen in the recent past. Stock markets have priced in a substantial amount of good news, and so it is more challenging for markets to drive forward from current levels.

To do so will require confidence that countries around the world can get back to a greater degree of normality. This may come from a medical solution or indeed a continuation of the re-opening that we have seen in many parts of the world.

It is clear that barring a medical solution such as a vaccine, significant risks remain that such re-openings may be delayed in areas where the virus regains a foothold. Despite these risks, government and central bank policy are likely to continue to provide an element of support to markets.

Away from virus-related issues, the other important event as we close in the year is the US presidential election in November. This can have significant implications on share prices as markets assess each candidate’s policies on geopolitical issues, tax and globalisation. As the next quarter draws to a close, we are likely to see some turbulence as a result.

As always, the 4Plus Plan is designed to navigate variable conditions, in order to deliver good returns but to also actively manage the risk and provide a more comfortable journey to investors. When it comes to variable conditions, the remainder of the year is unlikely to disappoint.

How has State Street Global Advisors driven positive social change in the past quarter?

We drive positive social change to the companies that the plan holds through engaging with them and voting on resolutions at company annual general meetings. Our aim is to promote positive changes to the environmental, social and corporate governance practices that the plan invests in.

We recently engaged with Tesco plc, and discussed how strong corporate culture is vital to support the company’s ambitious sustainability efforts. Tesco was the first FTSE 100 company to set a target to become a zero-carbon business by 2050. The company has also committed to source 100% of its electricity from renewable sources by 2030, and so far, has achieved 58% of this goal. In our engagement, we found that Tesco’s board places significant focus on the wider culture of the business. Tesco’s sustainability strategy, the “Little Helps Plan”, is inspired by the company’s core values and aims to mobilise all parts of Tesco’s business to focus on the social and environmental challenges that matter most to its customers, employees, suppliers and stakeholders.

In addition, we engaged with Apple Inc ahead of their annual general meeting. We engaged with the company multiple times to discuss the resolution pertaining to “Freedom of Expression and Access to Information Policies”. We determined that the company’s practices could be further strengthened, as certain aspects lagged those of its peers. During our engagement, we encouraged Apple to establish and publish a formal policy statement on human rights. Apple was agreeable to this request and intends to publish a formal statement on human rights with mention of freedom of expression within a year.

Today, there is a global focus on the value of diversity in the boardroom. Diversity is about having a balance of backgrounds and experiences on boards that manage companies. When we engage with companies, the diversity conversation is no longer about “why” we are engaging on the issue. Instead, the focus is “why not” enhance their board by embracing the value of diversity.

Earlier this quarter, we celebrated the Fearless Girl campaign’s third anniversary and International Women’s Day by creating a “Living Wall”, highlighting the number of companies that have added their first female director to their boards since we began our campaign in 2017. The campaign began with us placing a statue of a girl near New York City’s Wall Street and calling on companies to have at least one woman on their boards, failing which, we would take voting action against directors on the board.

After three years of productive engagements and voting, we are pleased to report that since the introduction of Fearless Girl in 2017, 681 companies, or approximately 49 percent of companies identified by State Street Global Advisors, responded to our call by adding a female director.

Your updated fact sheet will soon be available to download in the BeeHive. If you’d like to ask a question in the next update or share your thoughts, you can get in touch with PensionBee via email or Twitter.

As with all investments, past performance is not indicative of future performance and you may get back less than you start with.

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