Portfolio Manager
Portfolio Manager
An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.
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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.
COMMENTARY
Market Review
Global equity markets declined in December in local currency terms after the strong rally in November which followed the decisive US presidential election. This decline reflected concerns that persistent inflation in the US and other major economies could slow the fall in interest rates. Investor confidence was also dented by rising political uncertainty after ruling coalitions in Germany and France lost confidence votes in their parliaments. This brings forward the general election in Germany and leaves France with a very fragile government. Meanwhile, moves by parliamentarians to impeach South Korean President Yoon Suk Yeol further impacted market sentiment.
US inflation was unchanged in November at 2.8%, which enabled the Federal Reserve (Fed) to cut interest rates by 0.25% to a range of 4.25% – 4.50% during December. However, Chairman Jerome Powell’s language after the meeting hinted at a potential pause in the current rate-cutting cycle, as inflation remains stubbornly above the Fed’s 2.0% target.
The European Central Bank also reduced its key lending rate by 0.25% to 3.00%, its fourth cut in 2024, as domestic inflation edged down. Meanwhile, the UK’s Bank of England and the Bank of Japan both kept their rates unchanged.
The strongest performing sectors in December were communications services, consumer discretionary and information technology, while materials, real estate and energy were the weakest.
Portfolio Commentary
The Fund returned 3.8% in December, while the benchmark delivered 2.7%. Strong stock performance in communications services and industrials and an overweight position in communications services drove relative returns. This was partially offset by weak stock selection and an overweight position in the underperforming healthcare sector.
The largest contributor to relative returns in December was the overweight position in US-based technology giant and Google-owner Alphabet. It outperformed after unveiling a new quantum computing chip, Willow, which solved in five minutes a computing problem that reportedly would take a standard computer more than a trillion years. Additionally, the company released the latest version of its AI digital assistant, Gemini 2.0, which is two times faster than Gemini 1.5.
The Fund’s holding in US-based semiconductor and infrastructure developer Broadcom also contributed to relative returns. It outperformed after announcing strong quarterly earnings results and forward guidance. Broadcom expects revenue from custom-made semiconductors supplied to the company’s three existing large data-centre customers to increase to US$60–90 billion in 2027, far exceeding investors’ expectations. Broadcom is a key partner to the hyperscalers—the largest data-centre operators—in building their customised application-specific integrated circuits (ASICs). Investors are only now appreciating Broadcom’s strong market position and consistent free cash flows, although it has been held in the Fund since early 2022.
The Fund’s largest detractor from relative returns in December was US-based bio-pharmaceutical manufacturer Vertex Pharmaceuticals, which develops drugs to treat Cystic Fibrosis. The stock underperformed after announcing that its nonadditive drug for lower back pain had failed to perform better than a placebo in a late-stage trial.
The Fund was a long-term investor in US-based semiconductor developer NVIDIA before exiting its position in February 2024 due to valuation concerns. A new position was established in the stock during December. It became clear that it will take longer for emerging competitors to sufficiently narrow the technological gap with NVIDIA’s GPU chips to the extent they pose a threat to its pricing power. This made the valuation level more attractive. The company has also been developing next-generation products that extend beyond chips, including its sophisticated server rack system and development software, CUDA.
The Fund exited its position in US-based biopharma equipment supplier Repligen upon concerns for its future earnings growth.