20 February 2017

Over the past week Australian shares were 1.6% higher. Shares in developed countries were 1.2% higher with the US market up 1.5%. Shares in emerging markets gained 1.0%. The Australian dollar was 0.1% lower at 76.64 US cents. The 10 year bond yield in Australia was 0.10% higher at 2.80% while in the US, the 10 year bond yield closed unchanged at 2.41%. The oil price lost 0.9% to 53.40 US dollars per barrel.

You might read or hear news of class actions being taken against companies. A class action is a type of lawsuit run by an individual firm on behalf of a number of parties based on an alleged corporate wrongdoing. Sometimes we participate in these class actions. This article provides more background.

Why participate in a class action?

It holds company boards and executives accountable for their corporate behaviours. If they undertook misleading or deceptive behaviour which resulted in significant falls in the value of the company’s capital (shares and bonds) then a class action effectively provides an opportunity to seek damages for this behaviour. If successful there will likely be a financial gain for class action participants, once legal fees are paid. This gain goes straight back into the Fund. It sets an example that bad behaviour will be called to account, hopefully leading to better governance practices from the company and across the broader market.

Why participate through a class action and not claim directly?

These types of legal cases can be extremely expensive. A class action spreads the cost. Indeed most class actions are run by legal firms who are paid on a 'no win no pay' basis. These firms are typically experts in the area of class actions.

While we don’t participate in every class action, we do consider the merits of each specific case.

This work is coordinated by the Investment Operations team in close liaison with our Legal team. We also seek input from our underlying fund managers who might know the company very well.

Signing off

David Bell and Winnie Ramos

Past performance isn't necessarily an indicator of future performance.
All data sourced from Bloomberg.