It's hard enough to consistently beat the market, whether that be the S&P/ASX 200 Index (ASX: XJO), or the S&P/ASX 300 Index (ASX: XKO). But doing so without ASX energy shares over 2022, in particular, is a hard ask indeed.
After all, the ASX 300 has lost around 9.7% year to date. But the S&P/ASX 200 Energy Index (ASX: XEJ) has gained a whopping 34.3%.
That's been helped by ASX energy shares like Woodside Energy Group Ltd (ASX: WDS), which is up by around 50% in 2022 thus far. Whitehaven Coal Ltd (ASX: WHC) shares have gained an extraordinary 224% or so over the same period.
The ongoing war in Ukraine, as well as rising global inflation, has pushed energy prices up to historically high levels this year, to which any motorist would be able to attest.
And yet, the Ethical Partners Australian Share Fund has managed to beat the market. And without investing in fossil fuel shares at all. As an ethical fund, this fund manager excludes any fossil fuel-producing shares from its investing universe.
That's along with any company involved with gambling, alcohol, tobacco, uranium, weapons or predatory lending, as per the fund's environmental, social and governance (ESG) investing framework.
According to the fund manager, the Fund's C class units have delivered a loss of just 13.5% over the year to 31 August. That's an outperformance of almost 4% against the ASX 300 Index.
So how has this managed fund done it?
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Beating the market without ASX energy shares
Well, let's look at what kind of shares the Ethical Partners Australian Share Fund currently holds for an idea. So Ethical Partners fund manager Nathan Parkin recently sat down for an interview with the Australian Financial Review (AFR). He named several of the fund's winning ASX 300 shares.
The first is Graincorp Ltd (ASX: GNC). Graincorp shares are up more than 32% over the past year, and rose around 30% between January and May on the back of rising food prices. Here's what Parkin said on the fund's Graincorp position:
You've got to look in different places… There's a shortage of energy in the world, but there's also a shortage of wheat. It's somewhat of a hedge. The things that are affecting oil and gas are also affecting wheat.
Qantas Airways Limited (ASX: QAN) is another company that Parkin likes. He pointed out how Qantas is "committed to reducing carbon emissions by 25 per cent by 2030 from 2019 levels". Qantas shares have gained more than 26% over the past two months or so.
So this just goes to show that funds can deliver outperformance, even when they actively exclude what might be one of the best-performing sectors on the ASX 300 Index.
