Market Review
Global equity markets continued to move higher during June as inflationary pressures receded and hopes rose that the Federal Reserve will begin to reduce US interest rates later this year.
Market gains were driven by continued strength in the technology sector, as investors continued to focus on the earnings growth in business models aligned to the adoption of generative AI. Emerging Markets also performed well, boosted by expectations of lower US interest rates.
However, recent election results have introduced new volatility into both developed and emerging markets. Far-right parties made significant gains in the European Union’s parliamentary elections and saw their support rise in France and Germany.
In another anti-incumbent outcome, the centre-left Labour party, under more moderate leadership, secured a large majority in the UK Parliament, ending 14-years of Conservative government.
Indian equity markets fell sharply after Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) failed to secure a majority in that country’s elections. The market reaction proved short-lived, however, as it recovered to reach new highs by month-end.
In Mexico, Claudia Sheinbaum’s decisive victory over Xóchitl Gálvez led to a larger drop in Mexican stock prices, as investors braced for more populist policies.
Portfolio Commentary
The Fund is focussed on identifying great companies through bottom-up analysis and continues to find exciting opportunities in communications services, health care and industrials, in which it maintains overweight positions.
Growth investing is predicated on exposure to continuous waves of innovation, which can often lead to long periods of outperformance by well positioned stocks. The challenge for investors is to identify in advance the small number of companies which typically capture most of such wealth creation. The economic environment is changing continuously, which means today’s winners must constantly evolve to maintain their competitive advantage.
Company-specific risk is managed through a portfolio of approximately 50 high-quality companies, diversified across regions, industries and sectors. Our investment process identifies companies which can deliver sustained high profitability from their alignment to waves of innovation. These demonstrate financial strength, strong management teams and a sustainable competitive advantage.
This approach helped the Fund outperform the benchmark in June. Strong performance by the Fund’s holdings in information technology, consumer discretionary and communications services, and underweight positions in the weaker financials, materials and utilities sectors boosted relative returns. The underweight position in the high-performing technology sector and the overweight position in the underperforming industrials sector detracted from relative returns.
The Fund’s largest contributor to relative returns was its overweight position in US-based content creation and publishing software company Adobe. It outperformed after reporting record revenue for the second fiscal quarter of 2024, helped by strong sales and earnings growth. The company also raised its guidance for the remainder of 2024.
Shares in US-based e-commerce and cloud computing company Amazon rose sharply after electric vehicle maker Rivian Automotive (in which Amazon owns a 16% stake) announced it would form a joint venture with Volkswagen.
US-based Repligen, a manufacturer of advanced bioprocessing technologies used to make biologic drugs, detracted from relative returns after the company did not reiterate its earlier forward guidance. It also announced that CEO Tony Hunt would be stepping down.
The Fund’s holding in Denmark-based cancer drug manufacturer Genmab detracted from relative returns when it underperformed upon investor concerns regarding increasing costs.
The Fund exited its position in US-based sportswear manufacturer Nike due to rising competition from On Holding and HOKA. This has diminished the Fund Manager’s confidence that Nike will be able to turn around the company’s lagging sales trajectory.
Meanwhile, the Fund increased its position in US cloud-based software-as-a-service provider Salesforce, which provides customer relationship management and marketing automation software. It is attractively valued given the growth opportunities brought by its investment in generative AI capabilities.
Portfolio Manager
Portfolio Manager
Portfolio Manager
An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.
…
The Pengana Harding Loevner International Fund invests in high-quality, growing companies identified through fundamental research with a long-term, global perspective.
Pengana has appointed Harding Loevner to managed the Fund. Harding Loevner is a New Jersey-based global equity fund manager formed in 1989 with over US$86billion in Assets under Management.
Harding Loevner’ analysts search the world for companies that meet their high quality and durable growth criteria, conduct fundamental research, then value and rate their stocks to make them available to PMs for investment.
1. Harding Loevner was appointed fund manager as of 10 May 2021. June 2021 represents the first full month of Harding Loevner managing the Fund.
2. Class B Inception date 1 July 2015. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund (APIR PCL0026AU) in the table above which is the continuous performance of both the current and previous (shaded) strategies.
3. Harding Loevner Global Equity Strategy inception 1 Dec 1989
4. Prior to June 2021, the Harding Loevner Global Equity Strategy performance (labelled ‘Current Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Harding Loevner Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of Class B. From June 2021 the strategy performance is the performance of the Pengana Harding Loevner International Fund Class B.
5. MSCI All Country World Total Return Index in AUD.
6. Performance for periods greater than 12 months are annualised. Net performance figures are shown after all fees and expenses and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
7. The Harding Loevner Global Equity Strategy performance (shown in the shaded area in the chart, and in the performance table as row labeled ‘Harding Loevner Global Equity Strategy) has been simulated by Pengana from the monthly gross returns of the Harding Loevner Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. Strategy Inception 30 November 1989.
8. Annualised standard deviation since inception.
9. Relative to MSCI All Country World Total Return Index in AUD
* For further information regarding fees please see the PDS available on our website.
