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 were generally weaker during December, following a year of strong gains which led some investors to realise profits. This also reflected uncertainty concerning the future path of US monetary and trade policy.
Inflation continued to stabilise across the major global economies, but remained sticky in the US, where it was unchanged in November at 2.8%. However, the US consumer remains resilient, with retail sales ex-auto and gas increasing by 3.3% in November.
In contrast, the European economy continues to struggle, with Eurozone composite purchasing manager index (PMI) data signalling ongoing contraction across the economy in December. November retail sales growth slowed to 1.2% year-on-year in Europe, down slightly from 1.9% in the prior month.
Government stimulus measures helped manufacturing activity to expand in China. However, broader Chinese economic data continues to largely disappoint expectations. Consumer spending is sluggish, with retail spending falling in November, while the highly leveraged property market continues to drag on economic activity.
The Fund continues to overweight information technology, communication services and consumer discretionary, while underweighting financials, consumer staples and energy.
Overweight positions in information technology, communications services and consumer discretionary and the zero weight in energy and materials drove relative returns. However, this was somewhat offset by negative stock performance in industrials, financials and information technology.
The Fund’s largest contributor to relative returns was its overweight position in Taiwan-based multinational semiconductor manufacturer TSMC. It outperformed after several semiconductor companies reported strong monthly sales figures. In particular, US-based custom semiconductor and infrastructure developer Broadcom reported stronger than expected fiscal fourth quarter revenue, earnings and forward guidance. TSMC is the key manufacturing partner for Broadcom’s leading-edge custom-designed semiconductors.
US-based e-commerce and cloud computing group Amazon.com also performed well in December. Its cloud business Amazon Web Services (AWS) and retail e-commerce businesses both continued to track ahead of investor expectations.
The Fund’s holding in US-based technology group Alphabet also contributed to relative returns in December, reflecting several positive developments. Waymo (Alphabet’s autonomous ride-sharing project) released data that showed it gaining strong market share in metro areas where it has recently launched. Also, digital advertising data-points around the key holiday period signalled the potential for stronger than expected revenue and earnings growth in this business area. Finally, the newly unveiled Gemini 2.0 (the company’s latest AI digital assistant version) demonstrated superior performance relative to existing solutions.
The largest detractor from relative returns in December was the Fund’s overweight exposure to the US-based provider of corporate uniforms and related business services, Cintas. It underperformed after reporting organic sales growth that was lower than expected. The Fund has maintained its position, as the manager believes that the revenue miss will prove to be an isolated event and remains confident in the company’s earnings growth prospects.
The Fund’s zero weight to Broadcom detracted from relative returns in December. This followed the company’s strong fiscal fourth quarter results and updated guidance on its long-term AI-related earnings growth.
US-based Uber Technologies underperformed in December. This followed publication of data that highlighted how Alphabet’s autonomous ride sharing business Waymo was building market share in San Francisco and Los Angeles. While Axiom continues to monitor the competitive trends in the ridesharing sector, it believes that Uber will play an integral part in the adoption of robotaxis and remains very positive on the company’s long-term growth prospects. Axiom believes that Uber’s network effects will be extremely difficult to replicate and expects Uber to announce more robotaxi partnerships over the coming quarters.