Please click here to see Zevin Asset Management’s Q1 2016 results and corresponding charts. Attribution analysis, factbooks, as well as the performance of our taxable composites are available upon request. We will hold a conference to discuss these results–details are below.
During the quarter, our Global Appreciation non-taxable composite increased by 0.69%, net of fees, while our Global Appreciation with Income composite increased by 1.19%, net of fees. Our Global Equity strategy increased by 3.17% over the quarter. This compares to an increase in the MSCI All Country World Index (ACWI) of 0.38% and an increase in the 60/40 blended benchmark of the MSCI ACWI/Barclays Government/Credit bond Index of 1.72%.
During the first quarter our investments in defensive sectors such as telecoms, as well as our bias towards stable, largely diversified companies, contributed positively to performance. While our high cash position heading into the quarter initially helped protect client portfolios from sharp declines in January and February, cash ended up detracting from performance overall during the quarter as the market rallied at the end of the quarter. Also detracting from performance were our stock holdings in Japan and European health care.
In the quarter we added to stocks that had exposure to consumer spending as we see this as a continued source of strength due to increasing wages, job growth, and continued low energy prices. We sold stocks in both European financial and materials sectors, and stocks with high exposure to emerging markets, as we view these areas as a source of risk in the current economic environment.
* Please see disclosures below
** The Balanced Benchmark is comprised of 60% MSCI ACWI Index and 40% Barclays Aggregate Govt/Credit Index
Looking ahead, we continue to expect very low single digit returns for the global stock market over the next twelve months. The U.S. remains the least risky region on our analysis with consumer discretionary and healthcare sectors looking attractive. Stocks in the U.S. appear fully valued on current fundamentals, however, and we will look for more attractive entry points. In Europe we expect little economic improvement and continued lenient monetary policy in an effort to further stimulate growth. Exporters that can take advantage of a weak Euro look attractive on our analysis. In Japan, we remain concerned about the lack of Prime Minister Abe’s policies to stimulate growth and the recent strength of the Yen, which negatively impacts exporters. Given the sharp pullback in the Japanese market year-to-date, some stocks are looking more attractive, though we would like to see signs of an economic improvement before adding significant exposure to Japan. We are seeing some opportunities in Emerging Markets, particularly in those countries whose economies are not dependent on commodity prices and show solid economic growth potential.
We tackled a few different social and environmental issues this quarter. First, we were successful in convincing Walmart and the Texas utility company Centerpoint to improve disclosure of their lobbying activities. We’ve held multiple conversations with Starbucks this quarter about their in-store recycling problems; we’ve also been working to encourage the company to follow best practices when hiring people with criminal records. We have talked with PepsiCo, CVS, and TJX to push them to set quantitative goals for purchasing and generating renewable energy. CVS and TJX were also the subjects of pressure from Zevin with regard to minimum wage policy and advocacy. Finally, we engaged with a number of large mutual funds companies (including BlackRock, T Rowe Price, Franklin Resources, and BNY Mellon) on the inconsistency of their messaging around ESG (environmental, social, governance) investing and their terrible proxy voting records on climate change.
We will be holding a conference call to discuss performance, our thoughts on the market, and to take any questions you may have tomorrow, Thursday, April 21st at 1pm ET. The call-in number is (857) 444-0744 and the conference code is 746162. A recording will be available upon request.
As always, please do not hesitate to contact us with any questions or comments.