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Management Update

Dear Fellow Investors

2022 was a momentous year for Pella and for markets, albeit for conflicting reasons. Pella launched the Pella Global Generations Fund – Class B (retail class) on 1 January 2022 and made several important strides during the year. Meanwhile, markets had a difficult year with the MSCI ACWI delivering its worst returns since the GFC, bond markets* having their worst year in recorded history, cryptocurrencies collapsing, and real estate prices plummeting.

To make matters worse, equity markets stepped back from sustainability with most renewable energy stocks capitulating, Energy (primarily fossil fuels) was the best performing sector, and Texas and Florida state governments took steps to ban their state pensions systems from considering Environment, Social, and Governance (ESG) factors in their investment decisions.

Pella faced this environment with the comfort of knowing that its process consistently delivered across similar market environments over its 15-years of operation. Ultimately, it delivered again, as the Fund outperformed its benchmark by 2.8%^ and with superior sustainability to its benchmark (as measured by Pella and discussed in the Responsible Investment Report -2022). The Fund’s volatility of returns (15%)^ was marginally above the benchmark (14%), but this difference is negligible and does not detract from the performance and sustainability outcomes.

In addition, the Fund achieved several other milestones, including:

  • Zenith ranked the Fund second in its entire international Sustainable/Ethical fund universe.

  • Samsung Electronics, Flow Traders, and Sunrun become signatories of the UN Global Compact (UNGC), partly in response to Pella’s engagement with those companies, where we encouraged them to become UNGC signatories.

  • Pella submitted a resolution to the Marsh & McLennan Board to encourage them to make changes to their reporting on fossil fuel exposure (discussed in the 4Q22 Quarterly).

  • The Fund was accredited by the Responsible Investment Association Australasia and Pella became a signatory of the UN Principles for Responsible Investment.

  • Pella received approval from the Luxembourg regulator to launch the strategy in Europe using the Luxembourg UCITS structure. This structure is regarded as the gold standard by several market participants, and it took over one year of due diligence to receive this approval. Pella’s directors are not aware of any other Australian-domiciled fund that has previously achieved this.

  • The Fund expanded its platform positioning and is now available on AMP North, Netwealth, Macquarie Wrap and HUB24.

This year Pella’s outperformance relative to the Benchmark triggered a performance fee. Pella’s directors have made the decision to forego the performance fee earned this year meaning you get to keep it. The decision was made to demonstrate our appreciation of the support and loyalty of our clients who invested with us during the Fund’s inaugural year. To put some numbers around this, Pella calculates that $4,200 in performance fees has been saved for each $1m invested in the Fund at 1-Jan-22.

In every regard 2022 was a solid year for Pella and the Pella Global Generations Fund. Thank you for your ongoing support and we look forward to a future that targets consistent and healthy returns for you at no cost to generations of tomorrow.  

Best regards,

Directors of Pella Funds Management


* As measured by the Bloomberg Global Aggregate Bond Index

^ Past performance is not indicative of future performance

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