Please watch our video which highlights our Activism achievements for the year and our approach to shareholder engagement and proxy voting.

November 3, 2023Third Quarter 2023

Dear Client,

The third quarter of 2023 has ended and enclosed you will find your personalized quarterly performance report as of September 30th [1]. This letter will provide an explanation of overall NorthStar portfolio performance relative to our benchmarks, and we are happy to review your individual situation with you upon request.

Our View

We cannot begin a discussion of this quarter without acknowledging the tragedies taking place in Israel and Palestine, and increasingly across the world amid rising antisemitic and anti-Palestinian rhetoric and violence. Despite our years of work in human rights, seeing the way this crisis has unfolded is shocking. How do we begin to understand the loss of life? How do we begin to make sense of the permanent scars this will leave on those affected, both on the ground and afar? What will it mean and require for the thousands displaced to restart their lives?

Amid an issue as complex, historical, and deeply personal as this one, we are further than ever from understanding the right thing to say or do. One thing is clear: the attack on innocent people is never acceptable.

Given that so much of the situation is ongoing, it feels premature to even look forward while we are still in the midst.

Update on Economic Outlook and NorthStar’s Strategy

Higher for Longer Interest Rates

We usually lead with a discussion of equity markets, but, since early 2022, it has been the bond markets that have been driving returns across all other asset classes. This quarter was no exception, as both equity and bond markets finally began to accept the reality that the Federal Reserve Bank is intent on keeping its key Federal Funds Rate relatively high until the 2% inflation target is achieved. In conjunction, the yield on the 10-year US government bond increased by 83 basis points from 3.84% to 4.57%. There are many potential explanations for the increase in long-term yields: rising government deficits, resilient economic growth, reductions in purchases of US government debt by the Federal Reserve Bank and foreign central banks, unexpected supply shocks, or a confluence of all these factors. Nevertheless, we remain of the view that the recent 12 years [2] of near-zero short-term interest rates were an anomaly and that we have begun a long-term normalization cycle. We believe there is a high probability that interest rates will remain at these or higher levels over the mid-to-long term, as our government and others will need to fund Social Security, Medicare, and Defense programs while grappling with challenges related to ecological limits and socio-political upheaval.

As we have discussed in past letters, we remain convinced that the world remains severely imbalanced as it struggles to address complex interrelated societal, geopolitical and ecological challenges. As a result, we anticipate continued elevated volatility and uncertainty in financial markets going forward.

Adding higher yielding bonds to portfolios

So, how do we navigate the high degree of uncertainty in the financial markets? First and foremost, by ensuring we understand your financial needs and objectives and having an appropriate target asset allocation and liquid reserves. Since 1980, interest rates have declined, but now that cycle is reversing. This may pose a headwind for the equity returns we have become accustomed to, but it also provides an opportunity to earn higher 5-6% interest rates in bond portfolios. Therefore, where appropriate, we are adding government bonds in the 1-5 year maturity range to our clients’ portfolios. We believe that bonds in this maturity range offer an optimal combination of flexibility, higher income returns, and stability for the portfolio.

High quality stocks with low debt can still provide long-term growth.

It is not all doom and gloom for equities, though. We have often commented on the futility of short-term forecasts, and that remains the case. However, over the mid-long term, companies with low financial debt and that make products or sell services that are beneficial to human life and that solve or mitigate some of the most pervasive problems of our time should continue to thrive. We continue to own and add stocks of companies with these types of business models to equity portfolios. To manage risk, we follow our systematic quarterly rebalancing strategy in which we trim individual stocks that are well past their target weights and reallocate to stocks that are under their target levels.

Quarterly Performance [3]

Negative returns for both Equity and Fixed Income portfolios

The steepening of the yield curve (longer maturity yields increased by more than on the short term) led to steeper declines in the prices of bonds with longer maturities. Our fixed income portfolio underperformed the short-term benchmark as it holds longer maturity securities. This is primarily related to the benchmark mismatch issue, and we will be moving to a more appropriate benchmark in 2024. Compared to benchmarks [4] with similar maturities to our portfolio, the NorthStar fixed income portion outperformed.

Government Bond Yields (in percentage)

Jan 31, 2023 Mar 31, 2023 Jun 30, 2023 Sep 29, 2023
US Govt 2 Year 4.20 4.03 4.88 5.04
US Govt 10 Year 3.51 3.47 3.96 4.57

Source: Bloomberg, October 6, 2023

The equity portions of NorthStar clients’ portfolios underperformed our equity benchmark (70% S&P 1500 and 30% MSCI EAFE) for the quarter. The sudden rise in bond yields triggered an immediate sell-off in stocks, resulting in a quarterly return of -4.8% for the S&P 500 and -5.8% for the NASDAQ index. Most sectors had negative returns for the quarter. Oil companies in the energy sector had the highest positive returns as the price of oil spiked on news of low inventories and production cuts from Russia and Saudi Arabia. Traditional financials also eked out a positive return. As we don’t own these companies, it hurt our relative performance. Stock specific issues for a few of our holdings also detracted from quarterly returns. 

Buy List Stock Commentary

Below we highlight our best and worst performing stocks in the quarter.


Top Performers Bottom Performers
Company Total Return (IRR) Company Total Return (IRR)
Novo Nordisk ADR (NVO)
Adyen NV (ADYYN)
Intuit (INTU)
Tomra Systems (TMRAF)
Automatic Data Processing (ADP)
Etsy (ETSY)
Alphabet Class A (GOOGL)
Straumann Holding (SAUHF)
FedEx Corp (FDX)
Infineon Technologies (IFNNY)

Source: Axys/Advent
Note: IRR calculation is net of fees. [5]

Novo Nordisk is one of the largest manufacturers of insulin, which is a necessary medication for the hundreds of millions of people who have diabetes. The company has been an innovator in the pharma industry and has historically participated in programs that allow lower income or uninsured people to access their products. The stock posted a 15% return in the quarter and is up 41% year to date due to the recent explosive success of two of their drugs, Wegovy (for weight-loss) and Ozempic (for type 2 diabetes). The price appreciation resulted in an outsized position in the portfolio and hence we have recently trimmed to our target weight.

Because of the effectiveness of both drugs for weight loss, there has been unprecedented attention on social media and traditional news outlets, and we at NorthStar have been concerned that people seeking out the drugs for cosmetic weight-loss (which is off-label use) would prevent patients who truly need the medication from accessing it. Therefore, the research team engaged with the company management to share our concerns and learn about the risk mitigation processes that management has put in place. We learned that the firm is conducting company-wide discussions on this issue and engaging with outside stakeholders (scientists, doctors, regulators) on how to best address it. We plan to closely monitor management’s strategic decisions and choices in ensuring broad access and affordability of these medications to patient populations and will provide updates accordingly.

Adyen underperformed after posting disappointing earnings last month due to slowing growth and declining margins. Management attributed slower growth to increased cost focus at merchants as well as a rise in price competition from competitors. The main contributor to the operating margin decline was the increase in wages and salaries expense as the company continues to invest in sales and product development. When we have a stock that underperforms significantly as Adyen has, we take a step back and re-evaluate our view on the long-term strength of the business model. Adyen provides an end-to-end payment solution to businesses to process payments in-store and online. Adyen’s competitive advantage lies in the simplicity of its one-stop shop payment platform (gateway, processing, acquiring and settlement) which eliminates the need for merchants to work with multiple providers. Adyen has a strong cash position and minimal financial debt and robust cash generation. As a result, our long-term investment thesis is intact and we took advantage of the lower stock price to bring our position to target.

Fixed Income

Bonds posted a slightly negative return in the second quarter of this year. The yields on government bonds have seesawed through the first six months of 2023 as investors continue to react to economic data points in anticipation of the Fed’s next interest rate move.

We have a “buy and hold” philosophy when it comes to selecting bonds for your portfolio. We do not, trade bonds to capture gains or to take losses. In fact, we have tried to avoid taking losses in low interest rate bonds because we believe that the short-term benefits will cause longer-term harm. In addition, if the Fed starts to reduce the Federal Funds Rate in response to economic weakness at some point in the future, it is quite possible that the value of long-term bonds will increase. During the last several months, when possible, we have been actively looking for opportunities in bonds to lock in higher interest rates over longer periods of time. The current yield to maturity on the NorthStar fixed income portfolios is above 4% (despite lower coupons for certain bonds).

The NorthStar fixed income portfolio outperformed the Bloomberg 1-5 Year Bond Index. We believe the performance difference is primarily related to the composition and duration profile of the bonds we hold. During the quarter, long-term government, agency, and corporate bonds with maturities of greater than five years fared much better than shorter dated bonds as interest rates fluctuated throughout the quarter. Please note that NorthStar’s investment committee has identified a more appropriate benchmark that would most accurately reflect our bias for high quality fixed income combined with our commitment to supporting community loans funds and green bonds. However, we have also elected not to change the benchmark mid-year and instead defer a formal adoption of this new benchmark until next year.

Outside Investments [6]

Yes, summer has ended, but there is something about Fall that feels like a new beginning. Shifts in the weather, forage, and light patterns encourage us to pause, reflect, and consider new ideas and intentions. For Outside Investments, this shows up as completion of our spring and summer annual reviews of existing Outside Investments and our exploration of new organizations.

It is from this place that we’re excited to introduce you to Genesis Fund – a Maine based community development financial institution (CDFI) that we are now recommending. Genesis provides flexible, affordable financing and technical assistance to local Maine nonprofits focused on preserving and creating affordable housing. These nonprofits often face challenges in accessing appropriate capital and expertise for pursuing projects that are often complicated, time intensive, and regulatorily complex. Yet affordable housing isa critical, yet out of reach resource, for too many families, which makes Genesis’ enduring commitment and deep expertise critical.

 In addition to Genesis’ focus on housing, we have been especially impressed with their commitment to racial equity. There has been an influx of immigrants to Maine, particularly immigrants of African descent, and Genesis Fund has been at the forefront of providing this community with essential services and infrastructure.

We are glad to have connected with Genesis Fund over the past few years, and we look forward to introducing you to them. In the meantime, please let us know if you are interested in Genesis Fund, and we can have a conversation about how it might fit within your portfolio. You can find additional information on their work by visiting their website: https://genesisfund.org/.

Last but not least, we’ll be hosting an Outside Investments webinar this fall featuring speakers from the Community Development Financial Institutions that we’ve recommended. Please be on the lookout for an email with details on the event and how to register.

Shareholder Activism Update

We are proud to share that our 2022-2023 Social Change & Activism Annual Report (“the Activism Report”) has been published to our website. Reporting on the 2022 year of NorthStar’s shareholder activism and proxy voting, this document shares our current approach to some of the pressing issues of our time such as systemic racism in corporate culture, lagging diversity on the board of directors, and the erosion of human rights in the corporate supply chain. In our report, we detail outcomes of these efforts, including a fruitful engagement with PayPal on issues of racism and inequitable employment outcomes for people of color in its workforce. During that engagement, PayPal demonstrated the concrete steps it is taking to identify and dismantle structural racism that permeates corporate culture, allowing us to withdraw our proposal after successful dialogue. Additionally, we are pleased to report continued strong support for our equal voting proposals at companies where founders own shares with outsized voting rights and can outvote ordinary shareholders on matters of critical importance, indicating that shareholders at large agree that ordinary shareholders need a way to hold company management accountable.

Also in our Activism Report, you will find summaries of how we voted your proxies during the reporting year. In 2022 overall, we typically voted opposite of company management’s preferred voting outcomes (on 78% of proxy items). This means that we supported most (96%) shareholder proposals, against nearly all (99.9%) executive compensation packages, and continued to take a skeptical stance towards rote proxy items (like auditor elections) that may seem mundane but can have great significance. In our quarterly video that accompanies this letter, you will see two of NorthStar’s staff – Whitney Nguyen, Director of Impact Research, and Alexandra Dorfman, Client Service Associate – discuss more details of our 2022 Activism Report and our achievements for the year.

Administrative Matters

Client Service Updates

If you have questions or need any assistance, please continue to reach out to our Client Services Team by email at clientservices@northstarasset.com or by phone at (617) 522-2635.  We continue to be in the office daily, however, if you plan to stop by, please let us know in advance so we can be prepared for your visit. As always, we’re here to ensure your questions are answered quickly and your requests handled efficiently; please don’t hesitate to reach out to us!

Charitable Giving

Charitable giving is as important as ever! With the year-end approaching, we wanted to remind you to complete your charitable giving for 2023. If we’ve helped you with donations before, keep an eye on your email for a gift form, a record of your 2022 donations, and a summary of this year’s donations (if applicable).

If you’re thinking about giving $1,000 or more to your favorite non-profit(s) or need our help with contributing to your donor-advised fund for the first time, just give us a call or send an email, and we’ll be happy to assist. If your donations are less than $1,000, we can help with a funds transfer to your checking account so you can write checks directly to the organizations you support.


Julie N.W. Goodridge
Founder & Chief Executive Officer

Nimrit Kang
Chief Investment Officer

Information presented is for educational purposes only and should not be considered investment advice or an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.

Investment advice offered through NorthStar Asset Management, Inc.   The forecasts, opinions, and estimates expressed in this report constitute our judgment as of the date of this letter and are subject to change without notice based on market, economic, and other conditions. The assumptions underlying these forecasts concern future events over which we have no control and may turn out to be materially different from actual experience.

All data contained in this letter is from sources deemed to be reliable but cannot be guaranteed as to accuracy or completeness. All investments are subject to risk, including loss of principal. Past performance is no guarantee of future results. It is not possible to invest directly in an index.

This material may contain assumptions that are “forward-looking statements,” which are based on certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual results will not be materially different from those described here.

Links to third party sites are provided for your convenience and do not constitute an endorsement. These sites may not have the same privacy, security or accessibility standards.

[1] This report shows the quarterly change in your account value, your target asset allocation (equity, fixed income and cash), your current allocation, and your return (net of fees) for the last 10 years (or since you became a client) compared to your “custom benchmark,” which has the same percentages in each asset class as your account(s)’ current target allocation(s). If the total return of your account outperformed or underperformed your account’s custom benchmark, we will attempt to explain why in the body of this letter, and we are happy to review your individual situation with you.

[2] Fed Funds Rate was higher than zero between Q4, 2015 and Q1, 2020

[3] All data is for the quarter ending September 30, 2023 unless otherwise noted.

[4] The duration of our fixed income portfolio is similar to the Bloomberg US Aggregate Total Return Index based on data from Bloomberg and Axys/Advent

[5] Net of fees calculation is based on deducting management and custodian fees

[6] Outside Investments are privately placed with various types of entities, as described above. Privately placed investments generally carry higher risk. In addition to the risks of equity, (which include, but are not limited to, changes in revenue, margins, earnings, dividends, cash flow, balance sheet, leverage, liquidity, solvency, legal matters, negative publicity, brand image, and general market volatility) and the risks of fixed income investing (such as credit risk, interest rate changes and the yield curve, inflation, default, monetary policy changes, government instability, and other risks), Outside Investments are typically illiquid. More information on the risks of Outside Investments may be found in our ADV 2A brochure, located at: https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=854692


  • 617.522.2635
  • 617.522.3165
  • P.O. Box 301840, Boston MA 02130