Platform Availability
BT Panorama, Dash, Hub24, Macquarie Wrap, Mason Stevens, Netwealth, Praemium
Description
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.
COMMENTARY
Market Commentary
Global equity markets edged lower in February after a strong start to the year. The US market declined modestly as concerns grew over the impact of government policies on economic growth, corporate sentiment, and consumer demand. In contrast, European equities extended their gains from January, while emerging markets were broadly flat. However, China stocks rallied as government stimulus measures and AI optimism buoyed investor sentiment.
Investor enthusiasm for Chinese stocks was fuelled by the launch of open-source AI models from DeepSeek and Alibaba. These models demonstrated greater efficiency than comparable models from US firms. Additionally, a rare meeting between President Xi Jinping and leading technology executives was widely interpreted as signalling a shift toward a more pro-business stance by Chinese policymakers.
Across global sectors, consumer staples was the best-performing sector, supported by its defensive characteristics. Meanwhile, consumer discretionary stocks lagged, reflecting concerns about consumer demand in a slowing US economy. In the technology sector, policy uncertainty and its potential impact on AI supply chains weighed on sentiment. However, the broader implications of improved AI efficiency continue to evolve, bringing the potential to lower costs, increase adoption, and expand AI applications.
Portfolio Commentary
The Fund returned -2.2% in February, while the benchmark declined -0.3%. Weakness in information technology and healthcare stocks drove underperformance as concerns about slowing US economic growth dampened investor confidence.
Tencent was the Fund’s strongest performer, rallying alongside a broader rebound in Chinese technology stocks. It benefitted from increased investor optimism following signs of a more pro-business stance from Chinese policymakers. Additionally, the company saw strong engagement and revenue growth across its gaming and advertising businesses.
Sony also outperformed after reporting strong results, supported by revenue growth in its gaming division. The company benefited from increased sales of gaming content and hardware, as well as continued momentum in its entertainment and media segments.
In contrast, the Fund’s holdings in the technology sector were a key source of underperformance. Salesforce and Globant declined amid investor concerns over slowing enterprise spending and a weaker macroeconomic outlook in the US. Additionally, Globant indicated that political and trade policy risks in Latin America could negatively impact business sentiment.
Google-owner Alphabet also detracted from relative performance as renewed competition in AI, particularly from China’s DeepSeek’s large language models.
The Fund made several portfolio adjustments in February. Taking advantage of weakness in the IT sector, the Fund re-established a position in ASML, the Dutch advanced photolithography equipment supplier. ASML had been previously sold following a prolonged rally. A series of recent developments created an opportunity to repurchase shares at a 20% discount to the previous sale price. These included a downward revision to ASML’s 2025 outlook, export control concerns, and a demand reset for extreme ultraviolet (EUV) technology. ASML remains the dominant supplier of lithography equipment, with no credible competition in leading-edge semiconductor manufacturing. The company is expected to benefit from TSMC’s 2-nanometer process node ramp-up and increased EUV adoption. Additional growth opportunities include new semiconductor manufacturing facilities in Arizona and Japan.
Over the month, the Fund exited positions in US-based global technology group Apple and Netherlands-based digital payments group Adyen due to valuation concerns. Adyen’s share price had rallied since November 2024 and surged further in February upon strong second-half 2024 results, with revenues and earnings exceeding expectations. Given the sharp rise in its valuation, the Fund took profits and exited the position. Apple was also sold as its valuation exceeded long-term return expectations, despite its strong market position.
While near-term market conditions remain volatile, the Fund continues to focus on high-quality businesses with durable competitive advantages, strong cash flows, and the ability to benefit from long-term secular growth trends.