Managing Director/Portfolio Manager
CEO/Chief Investment Officer
The Pengana Axiom International Fund (Hedged) invests in companies that are dynamically growing and changing for the better, more rapidly than generally expected and where the positive changes are not yet reflected in expectations or valuation.
The Global Equity Strategy seeks dynamic growth by concentrating its investments in global developed markets, and may also invest in companies located in emerging markets.
The investment manager is Axiom Investors, a Connecticut-based global equity fund manager formed in 1998 with over US$19billion in assets under Management.
1. From 4 June 2021 the capital component of the foreign currency exposure for the Fund is hedged back to Australian dollars.
2. Axiom was appointed fund manager as of 5 May 2021. June 2021 represents the first full month of Axiom managing the Fund.
3. Inception date 1 July 2017. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund: APIR (HHA0002AU) in the table above which is the continuous performance of both the current and previous strategies.
4. Axiom Global Equity Strategy inception 1 Jul 2004.
5. Prior to 1 June 2021, the Axiom Global Equity Strategy performance (labeled ‘Current Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross USD returns of the Axiom Global Equity strategy. The Axiom Global Equity Strategy performance does not include the Pengana ethical screen
6. Prior to 4 June 2021 hedged performance has been simulated by Pengana for both the Fund and Index. This was done by: 1) using 3 month rolling forwards to hedge movements in the AUD/USD spot rate, and 2) deducting the Pengana International Ethical Fund (Hedged) management fee of 1.35% p.a. from the Fund’s performance.
From 4 June 2021, index performance is from the MSCI All Country World Total Return in AUD (Hedged). Prior to 4 June 2021, index performance is simulated from the MSCI All Country World Total Return in USD
7. 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.
8. Annualised standard deviation since inception.
9. Relative to the MSCI All Country World Total Return in AUD (Hedged).
*For further information regarding fees please see the PDS available on our website.
COMMENTARY
Global equity markets delivered strong gains in November. These were led by the US where sentiment was supported by inflation coming under control, the US Federal Reserve cutting interest rates by 0.25% to 4.50% – 4.75%, a stronger dollar and hopes of the new administration introducing pro-growth policies. The US consumer remains resilient, with underlying retail sales growing by 4.2% in October, up from 1.1% in September.
In contrast, European equities were little changed in November. Investors grew concerned about possible US tariffs impacting manufacturing exports, political instability in Germany and France, a lack of appetite for structural reform and October retail sales slowing to 1.9%, from 2.9% in September.
China’s share market also underperformed in November, as sluggish consumer spending and the highly leveraged property market drag on investor sentiment. However, manufacturing activity gathered pace following the government’s stimulus measures.
The Fund continues to overweight information technology, communication services, and consumer discretionary, while underweighting financials, energy, and consumer staples.
Strong stock performance in communication services and financials, the overweight to consumer discretionary and the zero weight to materials drove relative returns. However, this was somewhat offset by the underweight to financials and weaker stock performance in information technology.
The Fund’s largest contributor to relative returns was its overweight position in US-based international streaming and production company Netflix. It outperformed after the Jake Paul versus Mike Tyson boxing match brought an increase in subscribers. The success of the event showed the potential for Netflix to continue expanding into live sports.
US-based e-commerce and cloud computing company Amazon also performed strongly during November. Intra-quarter data for both Amazon Web Services and North America retail same store sales remained strong, tracking ahead of market expectations.
The largest detractor from relative returns was the overweight position in Taiwan-based multinational semiconductor manufacturer TSMC. It underperformed in the aftermath of the US election, reflecting rising geopolitical uncertainties and potential tariff implications. We remain confident that the company’s fundamentals remain extremely positive as AI adoption gathers pace.
Italian luxury sports car manufacturer Ferrari underperformed after peers Aston Martin, Burberry and Richemont provided weaker guidance for luxury goods spending. Slower consumer activity in China continues to impact investor sentiment in the luxury sector, although Ferrari has relatively little exposure to the country. We remain optimistic that demand will remain strong and earnings growth can exceed forecasts.
The Fund established a position in Belgian biopharmaceutical group UCB Biopharma, which focusses on rheumatology and neurology. The company’s osteoporosis treatment Evenity continues to exceed revenue growth estimates. We believe that Evenity and immunology treatment Bimzelx sales will grow well ahead of analysts’ consensus forecasts and deliver higher pricing than currently expected by the market.
During November, MSCI awarded Japan-based international department store chain Isetan Mitsukoshi an ESG upgrade from ‘AA’ to the highest rating of ‘AAA.’ This followed improved disclosure of the company’s labour management practices, which are now comparable with those of industry peers. The company now also tracks its upstream Scope 3 emissions, including products and services procured through its supply chain.
Axiom engaged with US enterprise software company ServiceNow on ESG issues. This was positive, as it outlined the anticipated launch of the water risk training modules for suppliers next year. This marks an enhancement of its overall sustainability training.
Axiom also engaged with Ferrari after MSCI recently highlighted potential supply chain risks in China. Ferrari re-affirmed its recent supply chain audit, which found no supply-chain related risks at Ferrari’s suppliers in the region.