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Category Archives: Perspectives

Post Reporting Season Wrap

19 March 2025 4:35 pm ⋅ Leave a Comment ⋅ ⋅ Featured

19th March, 2025

Reporting Season Wrap

Paradice Portfolio Managers offer their perspectives on the recent reporting season

Disclaimer:

This material is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619, AFSL No. 224158) (Paradice, we or us) to provide you with general information only. This material (or contribution to it) is not intended to constitute advertising or advice (including legal, tax or investment advice or security recommendation) of any kind.  It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. 

Equity Trustees Limited (ABN 46 004 031 298, AFSL No. 240975) (Equity Trustees) is the responsible entity of, and issuer of units in, the Paradice Funds (Fund(s)). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX:EQT).  In deciding whether to acquire, or to continue to hold, units in the Funds please read the current product disclosure statement which is available by visiting www.paradice.com and the Target Market Determination (TMD) which is available at www.paradice.com/au/investor-centre/. A TMD describes who this financial product is likely to be appropriate for (i.e. the target market), and any conditions around how the product can be distributed to investors. 

Past performance of the Funds is not a reliable indicator of future performance. The value of an investment in the Funds may rise or fall. Returns are not guaranteed by any person.  Paradice may have a relevant interest, in their capacity as investment manager, in the securities mentioned in this interview. In addition, this material represents only the views of each specific investment team as at the time of release and is not intended, and may not, represent the views of Paradice or any of the other investment teams at Paradice. 

This material may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions and judgments, you should not place undue reliance on these forward looking statements, nor should you regard the inclusion of these statements as a representation by Paradice that the strategy objectives will be achieved. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct. The information and opinions contained in this material have been and any third party data contained herein is obtained from sources considered to be reliable, but neither Paradice, nor any of its related parties, directors or employees make any representations or guarantees with regard to the accuracy of such data. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

This material is not to be copied, reproduced or published at any time without the prior written consent of Paradice. Neither Paradice, Equity Trustees, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. 

PIM

Contributors:

Jovana Gagic

Tom Richardson

Julia Weng

Sam Theodore

Further Information

Meet Our Investment Teams

Our Funds

Posted in: Perspectives

Report: Observations from Paris Trip

23 October 2024 3:20 pm ⋅ Leave a Comment ⋅

 September, 2024

Report: Observations from Paris Trip

Paradice Global Equities Team

 

In September, Toby Shute, an analyst on the Global equities team, attended a pan-European equities conference hosted by Kepler Cheuvreux in Paris. He participated in 17 group and one-on-one company meetings over the course of three days. This provided a good opportunity to check in with firms that the Global team either owns or has studied in the past, in addition to meeting several others for the first time. The conference setting also provided an opportunity to compare notes and trade war stories with other Global and European-specialist investors.

Read the report here.

Disclaimer:

Not for onward distribution.
This material is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619 AFSL No 224158) (Paradice, we or us). This material is not intended to constitute advertising or advice (including investment advice or security, market or sector recommendations) of any kind. In addition, this material represents only the views of the Paradice Global Equities team as at the time of release and is not intended, and may not, represent the views of Paradice or any of the other investment teams at Paradice. It does not reflect any events or changes in circumstances occurring after the date of publication.
It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct. You should perform your own research and due diligence, consult your own financial, legal, and tax advisors before making any investment decision with respect to transacting in any securities covered herein. Following publication of this material, the investment teams at Paradice may transact or continue to transact in any of the securities covered herein, and may be positive, negative or neutral at any time hereafter regardless of our initial conclusions, or opinions.
This material is not to be copied, reproduced or published at any time without the prior written consent of Paradice. Paradice or any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material.
The information and opinions contained herein, including information obtained from third party sources which are considered to be reliable, are not necessarily all inclusive and, as such, no representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained herein and no responsibility arising for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Paradice, its officers, employees or agents.
Copyright© 2024 Paradice

Contributors:

Toby Shute

Further Information

Meet Our Investment Teams

Posted in: Perspectives

Report: Observations from China and USA Trip – Paradice Australian Equities Strategy

21 October 2024 3:05 pm ⋅ Leave a Comment ⋅

 October, 2024

Report: Observations from China and USA Trip

Paradice Australian Equities Strategy

Recently David Feng, a portfolio manager/analyst from the Australian equities team, undertook a three-week trip to China and the US. Below is an update on the local economy and a view of in-trend topics from those locations. The trip comprised of company visits, interviews with industry contacts and experts, meetings with sector analysts, and conferences with participants from both listed and unlisted companies.

Read the report here.

Disclaimer:

This material is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619 AFSL No 224158) (Paradice, we or us).
This material is not intended to constitute advertising or advice (including investment advice or security, market or sector recommendations) of any kind. In addition, this material represents only the views of the Paradice Australian Equities team as at the time of release and is not intended, and may not, represent the views of Paradice or any of the other investment teams at Paradice. It does not reflect any events or changes in circumstances occurring after the date of publication.
It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct. You should perform your own research and due diligence, consult your own financial, legal, and tax advisors before making any investment decision with respect to transacting in any securities covered herein. Following publication of this material, the investment teams at Paradice may transact or continue to transact in any of the securities covered herein, and may be positive, negative or neutral at any time hereafter regardless of our initial conclusions, or opinions.
This material is not to be copied, reproduced or published at any time without the prior written consent of Paradice. Paradice or any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material.
The information and opinions contained herein, including information obtained from third party sources which are considered to be reliable, are not necessarily all inclusive and, as such, no representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained herein and no responsibility arising for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Paradice, its officers, employees or agents.

Contributors:

David Feng

Further Information

Meet Our Investment Teams

Posted in: Perspectives

Report: Is there an opportunity to invest in Australian Small Caps now?

13 August 2024 12:07 pm ⋅ Leave a Comment ⋅

 August, 2024

Report: Is there an opportunity to invest in Australian Small Caps now?

Paradice Australian Small Cap Opportunities Fund

 
This thought piece discusses what we are seeing in the small cap space in the US and whether this suggests that there are opportunities within the Australian small cap market.

Are US small cap stocks setting the scene?

There has been a lot of commentary and media recently talking about the great rotation currently underway globally out of large caps and into small caps.

Below is a chart of the Russell 2000 (blue line; representing US Small Caps) vs the S&P 500 (white line; US Large Caps) over the last month, which illustrates close to a 10% performance difference between the two indices.

(Source: Internal, Bloomberg, as at 1 August 2024)

Why might this rotation be happening and what does it mean in an Australian context? 

  • In our view, AI is an expense at the moment rather than a revenue generator. This goes to the cost of building out the infrastructure for AI and the lag as capacity fills up before returns come.
  • Concentration risk may be playing out. The 10 largest stocks by market capitalisation in the S&P 500 accounted for 27% of the index at the end of 2023, nearly double the 14% share of a decade earlier (source: Morgan Stanley). This has increased to 37% in 2024 according to FactSet data, with the Magnificent Seven making up 31% of the index. That rate of increase in concentration is the most rapid since 1950, according to Morgan Stanley. In our view the Magnificent Seven will have to keep positively surprising on earnings to maintain that momentum.[1]  
  • The rotation began after the June 2024 CPI. In our view, this will get stronger when interest rate cuts begin to materialise and the move in US small caps over the last month suggests conviction on the rotation growing, a trajectory which could play out similarly in an Australian context as outlined below.

Interestingly, in Australia, we have not yet seen this play out at the index level – with Small Caps (the blue line in the chart below) only slightly ahead vs the ASX100 over the last month. 

 (Source: Internal, as at 1st August 2024)

There are probably a number of reasons why this might be the case, but typically what we are seeing transpire in the US could follow here with a lag, depending somewhat on the local interest rate cycle.

And if we do see a catch up here in Australia, the scale is likely to be quite big – given the level of underperformance we have seen over the past 3 years:

 (Source: Internal to Paradice, as at 31 July 2024)

Paradice Australian Small Cap Opportunities Fund (“SCOF” or “the Fund”) turned one on 20 July 2024

Why consider an investment in SCOF?

  1. Fund Performance: SCOF has performed strongly in its first 12 months; delivering 29.99% total return, 20.70% above benchmark return of 9.29% (being the S&P/ASX Small Ordinaries Total Return Index. Refer also to table below).[2]
  2. Investment Philosophy/Process: SCOF employs a similar process to the original Paradice Small Cap Fund founded in 2000; which has delivered >14% p.a. total return over this time.[3]
  3. Fund Size: SCOF has a relatively small FUM allowing it to be nimble, take advantage of mispricing while focusing on capital preservation and compounding returns.
  4. Boutique Structure: As a Paradice product, SCOF is able to leverage off the wider Paradice network.
  5. The Australian Small Cap Index[4] has materially underperformed Large Caps[5] by c.25% since interest rates started rising in early 2022. With rates close to a peak; and early signs of a small cap re-rate occurring in the US; now is a good time consider investing in Australian Small Caps in our view.     

1) Fund Performance:

SCOF celebrated its one year anniversary on 20 July 2024.

For the year to 31 July 2024 the Fund delivered a c30% total return before tax, after ongoing management costs and accrued performance fees.

Details below:

31 July 2024

Past performance of the Fund is not a reliable indicator of future performance. The value of an investment in the Fund may rise or fall. Returns are not guaranteed by any person. Fund returns are calculated before tax, after ongoing management costs and any accrued performance fees (unless waived). Returns greater than 1 year are annualised.

2) Investment philosophy/process:

As at 30 June 2024, the existing Australian Small Cap Fund has returned 14.9% total gross return and 9.34% alpha per annum over 24 years.[3]

SCOF implements a similar investment philosophy to that implemented successfully by the other Paradice Funds – including the existing Australian Small Cap Fund.

3) Fund size:

SCOF is a capacity constraint product – we will limit FUM to maximise alpha generation.

Further we are at the early stage of SCOF’s life cycle, which has obvious benefits:

– increased nimbleness to trade in and out of stocks; and

– broader investment opportunities.

4) Boutique structure supported by the wider Paradice business:

The investment team behind SCOF are co-investors in the Fund alongside our clients, which creates strong alignment. SCOF can also leverage the wider Paradice funds management network. 

5) Time for Australian small caps? 

With the Australian Small Cap Index near 15-year lows; and the early stages of a potential re-rate underway in US Small Caps; now could be an opportune time to invest in Australian Small Caps. 

[1] Source: How Magnificent 7 affects S&P 500 stock market concentration (cnbc.com))
[2] Past performance of the Fund is not a reliable indicator of future performance. The value of an investment in the Fund may rise or fall. Returns are not guaranteed by any person. Fund returns are calculated before tax, after ongoing management costs and any accrued performance fees (unless waived). Returns greater than 1 year are annualised.
[3]Returns presented on a “gross” basis do not reflect any management fees, and other potential expenses to be borne by the investors. The Australian Small Cap Fund is managed by a separate investment team and is distinct from the Australian Small Cap Opportunities Fund. 
[4] The S&P/ASX Australian Small Industrials Index. 
[5]The S&P/ASX Australian All Ordinaries Index. 

Disclaimer:

This material is prepared by Paradice Investment Management Pty Ltd (ABN 64 090 148 619 AFSL No 224158) (Paradice, we or us).

This material is not intended to constitute advertising or advice (including investment advice or security, market or sector recommendations) of any kind. In addition, this material represents only the views of the Paradice Australian Small Cap Opportunities team as at the time of release and is not intended, and may not, represent the views of Paradice or any of the other investment teams at Paradice.

Equity Trustees Limited (ABN 46 004 031 298, AFSL No. 240975) (Equity Trustees) is the responsible entity of, and issuer of units in, the Paradice Australian Small Cap Opportunities Fund (Fund). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX:EQT). 

It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct. You should perform your own research and due diligence, consult your own financial, legal, and tax advisors before making any investment decision with respect to transacting in any securities covered herein. Specific securities identified herein are not representative of all securities purchased, sold, or recommended by the Fund previously or in the future. Following publication of this material, the investment teams at Paradice may transact or continue to transact in any of the securities covered herein, and may be positive, negative or neutral at any time hereafter regardless of our initial conclusions, or opinions.

The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication. 

You should consider your own needs and objectives and consult with a licensed financial adviser when deciding whether a Paradice Fund is suitable for you. You should also read the current Product Disclosure Statement and Target Market Determination available at www.paradice.com. A Target Market Determination is a document which is required to be made available by 5 October 2021. It will describe who this financial product is likely to be appropriate for (i.e. the target market), and any conditions around how the product can be distributed to investors. It will also describe the events or circumstances where the Target Market Determination for this financial product may need to be reviewed. 

This material is not to be copied, reproduced or published at any time without the prior written consent of Paradice. Neither Paradice, Equity Trustees, nor any of their respective related parties, directors or employees, make any representation or warranty as to the accuracy, completeness, reasonableness or reliability of the information contained in this publication or accept liability or responsibility for any losses, whether direct, indirect or consequential, relating to, or arising from, the use or reliance on any part of this material. 

The information and opinions contained herein, including information obtained from third party sources which are considered to be reliable, are not necessarily all inclusive and, as such, no representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained herein and no responsibility arising for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Paradice, its officers, employees or agents.

Equity Trustees nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it

Copyright© 2024 Paradice

Contributors:

Sam Theodore

Head of the Australian Small Cap Opportunities Fund

Michael Peet

Portfolio Manager of the Australian Small Cap Opportunities Fund

Further Information

Learn more about the Paradice Australian Small Cap Opportunities Fund

Posted in: Perspectives

Julia Weng Speaks to Ausbiz about Rate Hikes and Market Spikes

10 November 2023 2:38 pm ⋅ Leave a Comment ⋅

Julia Weng Speaks to Ausbiz about Rate Hikes and Market Spikes

Portfolio Manager / Analyst from our Australian Equities team, Julia Weng, speaks to AusBiz about the potential RBA rate hikes, the Aussie dollar’s potential rebound and investment strategies.

Watch the video here.

Disclaimer:

This material (or any contribution to it) is not intended to constitute advertising or advice (including legal, tax or investment advice or security recommendation) of any kind.  It is of a general nature only and was current only at the time of initial publication. The information and opinions contained herein are not necessarily all-inclusive and, as such, no representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained herein and no responsibility arising for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Paradice, its officers, employees or agents.  It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. You should consider your own needs and objectives and consult with a licensed financial adviser. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct.  References to securities may or may not represent the holdings of the Paradice Funds.  The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

Posted in: Perspectives

3 Preferred Materials Exposures and 1 Sector to Avoid

18 July 2022 2:35 pm ⋅ Leave a Comment ⋅

3 preferred materials exposures and 1 sector to avoid

In a normal cycle, high prices for commodities from high demand would lead to increased supply and finally a drop in prices – but these are far from normal times.

Tom Richardson, Lead Portfolio Manager of the Paradice Equity Alpha Plus Fund, factors like the energy transition, underinvestment in production and ongoing demand from China may see prices rise further, or at least stay higher for longer. He is the first to say this might be a dangerous view and investors should be selective about their commodities investments.

Disclaimer:

This publication is not intended to constitute advertising or advice (including investment advice or security, market or sector recommendations) of any kind. It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. Equity Trustees Limited (ABN 46 004 031 298, AFSL No. 240975) (Equity Trustees) is the responsible entity of, and issuer of units in, the Paradice Funds (Funds). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX:EQT). You should consider your own needs and objectives and consult with a licensed financial adviser when deciding whether a Paradice Fund is suitable for you. You should also read the current Product Disclosure Statement and Target Market Determination available at www.paradice.com. References to securities may or may not represent the holdings of the Paradice Funds. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct. The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

Posted in: Perspectives

#MeToo Momentum Continues in Australian Workplaces & Investors Must Take Note

14 February 2022 10:07 pm ⋅ Leave a Comment ⋅

From Parliament to the Pilbara: #MeToo momentum continues in Australian workplaces and investors must take note

Starting as a viral social media response to revelations of horrific sexual abuse allegations against influential Hollywood producer Harvey Weinstein in 2017, the #MeToo movement made the front pages for months and started serious public conversations. Conversations about everyday sexism, sexual assault and harassment of women, power dynamics in the workplace and fear of retaliation.

While the prominence of #MeToo might have died down in everyday news flow, we can’t underestimate the impact the movement has had in shining the spotlight on these issues and importantly providing a common language for women to demand better. It has also laid the ground for new voices to build upon the movement and continue momentum for change.

In Australia, the mantle has been taken up by the likes of Grace Tame and Brittany Higgins. The former, who just completed her time as Australian of the Year, has advocated for child sexual abuse survivors having been one herself at the hands of her schoolteacher. Grace’s message has also spoken to power dynamics, their role in abusive behaviour and in eliciting fear and silence from victims. Many of the public have seen that same abuse of power occur in so many settings, especially in the workplace.

Brittany Higgins, formerly a staffer in Federal Parliament, became instrumental throughout 2021 in driving community-led activism for women’s rights with the March for Justice. It saw women take to the streets and outside parliaments around Australia to demand the changes necessary so they could feel safe at work and have better legal protections.

Higgins’ advocacy prompted an independent inquiry into parliamentary workplaces led by the Sex Discrimination Commissioner Kate Jenkins, who was tasked with making recommendations on how to ensure parliamentary workplaces are safe and respectful. In November 2021 Jenkins published the report on her findings, ‘Set the Standard’. While some aspects were unique to Parliament, much of the report was applicable to all workplaces and offered insights into everyday experiences for less dominant groups, typically women.

Set the Standard identified drivers of bullying, sexual harassment and sexual assault: power imbalances and the misuse of power; inequality of gender and other non-dominant groups; and insufficient accountability for poor behaviour. This has been amplified and reinforced by unclear and inconsistent application of behavioural standards, poor leadership, negative workplace culture, and ineffectual structures for employment and promotion.

It also revealed that 1 in 3 parliamentary workers had experienced sexual harassment, and that harassment occurs at much higher rates for women compared with men (63% vs 24%). Rates are higher again for people who identify as LGBTIQ+.

Similar rates of sexual harassment have been revealed through submissions and hearings for the WA inquiry into sexual harassment against women in the fly-in/fly-out (FIFO) mining industry which commenced in July 2021. The final report is due in April this year and we expect to see further confirmation of the key drivers and risk factors relating to sexual harassment in the workplace detailed in the Jenkins report.

Despite these rumblings of under-appreciated rates of sexual harassment and bullying in Australian workplaces in recent months, when Rio Tinto this month published a landmark report into its own workplace culture it appeared to catch many by surprise. The review, led by former Sex Discrimination Commissioner Elizabeth Broderick, detailed high rates of bullying, widespread sexual harassment and racism being a common occurrence. Like Jenkins, Broderick was given a mandate to make recommendations for Rio Tinto to improve safety and inclusion in the workplace.

To Rio Tinto’s credit, it published the report in full and at the same time committed to implementing all recommendations, providing unprecedented transparency to stakeholders and importantly offered accountability. It was also an act of leadership, demonstrating an acceptance of what has come up as a common theme in these various inquiries: the role of leaders is vital. “Caring and inclusive leadership” and “setting the tone from the top” remains one of the more impactful means through which to drive meaningful workplace change.

But what now is the role of investors?

For boards and senior executives of listed companies it would be foolish – if not dangerous – to assume their workplace is free from bullying and sexual harassment. The rates at which this occurs amongst the general population would indicate it’s statistically improbable they are unimpacted. Further, the Jenkins parliamentary and the WA FIFO inquiries have demonstrated that certain workplaces face elevated risks. For example, those workplaces where power imbalances may be amplified; are male-dominated; and where socialising outside of work hours is more common (which can blur professional boundaries).

Investors must ensure that the boards and executives of their investee companies are reconsidering how they understand and monitor their workplace cultures. It is the role of an investor to be sceptical of claims that “it’s all in hand”. This is especially the case as all of these inquiries have revealed that victims so often fear speaking up and reporting harmful behaviour. How can a company be so sure, then, that those behaviours aren’t occurring?

This requires a new approach to understanding the workplace, its culture and the barriers to creating safe and inclusive environments for employees. Investors should be challenging companies to not solely rely on voluntary reporting through mistrusted channels and instead ask how companies can innovate to elicit relevant information from staff to get a more accurate ‘sense check’ of the state of play with respect to bullying and harassment.

As the Rio Tinto report highlighted, both formal and informal channels are needed to safely call out poor behaviour. This includes encouraging all staff to be “active bystanders” and, for example, not stay silent should a colleague make a sexist remark. Further, options for reporting should be reinforced by actions which give employees confidence that there are consequences for perpetrators and victims are protected.

Investors should also challenge investee companies’ approach to leadership and encourage training and capability building relating to caring and inclusive leadership styles. At a minimum this should be for the most senior leaders, but preferably middle management as it is this group which is often at the frontline in responding to instances of poor behaviour and “living” the culture of the company.

While many companies won’t be as well-resourced as Rio Tinto to undertake a multi-month review, there are still improvements every company can make to improve safety and inclusion for all their staff. With investors being afforded influence through their shareholding, they should push companies to see what can be done within their operations.

Failure to make safe and inclusive workplaces can not only have serious and long lasting negative impacts upon the victims of the resultant bullying, sexual harassment or assault, it results in poor business outcomes such as loss of productivity or challenges in attracting the best talent. While investors should be morally concerned with any harm caused to individuals, when there is also a clear potential for value destruction, they must act to ensure companies are managing this issue appropriately.

Written by: Maddy Dwyer and Nick Varcoe, Paradice ESG

Disclaimer:

This material (or any contribution to it) is not intended to constitute advertising or advice (including legal, tax or investment advice or security recommendation) of any kind.  It is of a general nature only and was current only at the time of initial publication. The information and opinions contained herein are not necessarily all-inclusive and, as such, no representation or warranty, express or implied, is made as to the accuracy, completeness or reasonableness of any assumption contained herein and no responsibility arising for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Paradice, its officers, employees or agents.  It may contain certain forward looking statements, opinions and projections that are based on the assumptions and judgments of Paradice with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Paradice. Because of the significant uncertainties inherent in these assumptions, opinions and judgments, you should not place undue reliance on these forward looking statements. You should consider your own needs and objectives and consult with a licensed financial adviser. For the avoidance of doubt, any such forward looking statements, opinions, assumptions and/or judgments made by Paradice may not prove to be accurate or correct.  References to securities may or may not represent the holdings of the Paradice Funds.  The content of this publication is current as at the date of its publication and is subject to change at any time. It does not reflect any events or changes in circumstances occurring after the date of publication.

Posted in: Perspectives ⋅ Tagged: ,

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