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Pengana International Equities Limited (ASX: PIA)

The largest International Ethical LIC on the ASX. Targeting fully franked dividends, paid quarterly.

July 2020 - Monthly REPORT

A TIME TO STICK TO FUNDAMENTALS

SHARE PRICE

NTA POST-TAX

NTA PRE-TAX

INVESTMENT PERFORMANCE1

DIVIDEND YIELD2

CONSECUTIVE DIVIDENDS PAID

1. Investment performance since new mandate adopted 1 July 2017.
2. Dividend yield is based on current displayed share price and dividends declared over the previous 12 months
3. Grossed up yield is based on current displayed share price, dividends declared over the previous 12 months and the tax rate and franking percentage applicable for the most recently declared dividend

SUMMARY

July was another strong month for global share markets and, while it can be tempting to ride the positive momentum, it is important to stick to our fundamental principles.

Deputy portfolio manager, Steven Glass, also appeared on CNBC’s Capital Connection to discuss the team’s reducing exposure to large-cap U.S. growth companies. Watch the interview HERE

 

ANNOUNCING A FULLY FRANKED DIVIDEND OF 2.5c per share

PORTFOLIO

Top Holdings (alphabetically)

Alibaba Group Holding LTD China Consumer Discretionary Charter Communications Inc United States Communication Services Houlihan Lokey Inc United States Financials Mowi ASA Norway Consumer Staples Pinterest Inc United States Communication Services Rakuten Inc Japan Consumer Discretionary Tencent Holdings China Communication Services Thermo Fisher Scientific United States Health Care UnitedHealth Group Inc United States Health Care Vestas Wind Systems A/S Denmark Industrials
See Portfolio Breakdown

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Jul 20201
1 Month1 YearSINCE MANDATED
Fund 1.4%10.9%10.4%
Benchmark 0.6%3.1%10.5%
1 Month1 YearSINCE MANDATED
Fund
1.4%
10.9%
10.4%
Benchmark
0.6%
3.1%
10.5%

COMMENTARY

July was another strong month for global share markets and, while it can be tempting to ride the positive momentum, it is important to stick to our fundamental principles. We hold quality businesses at reasonable valuations, and we do this to avoid overpaying, and to minimise downside risks.

The US stock market is one example of extreme price movements and valuations, particularly within the technology sector. As such, the portfolio has been taking profits on certain holdings where valuations reached levels that appeared to be pricing in a potentially benign, if not positive, outlook for the US economy. Our cautious stance on the US economy and stock market is also reflected in our underlying US dollar exposure that we have lowered to approximately 20%, which is significantly below the Benchmark.

Without compromising on quality, we have found value outside of the US as we have seen greater opportunities across Europe and emerging markets.

With an active shift away from the strongest market and sector, being US and technology, the Portfolio returned 1.4% over the month while the MSCI World TR Index returned 0.6%. We are very pleased with the Portfolio’s performance particularly in a strong market and despite its defensive tilt.

The Portfolio’s outperformance was driven by strong active stock picking.  Pinterest, Vestas Wind Systems and Alibaba were notable contributors to relative return adding 1.2%, 0.6%, and 0.4% respectively while Bharti Infratel, MOWI, and Cigna detracted 0.5%, 0.4%, and 0.3% respectively to the Portfolio’s relative return.

As at the 31 July 2020 the Portfolio has 87% of total NAV invested, with the remainder in AUD cash. Notable regional exposure includes 40% in the US vs. 60% in the Benchmark, and 30% in Europe (ex. UK) vs. 15% in the Benchmark.

We believe the Portfolio is positioned well and is in good stead to meet its three key aims of growing wealth, protecting capital, and minimising volatility.

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY3
12.5%
NUMBER OF STOCKS
35
BETA4
0.47

FEATURES

  • ASX CODE PIA
  • FEES Management Fee: 1.23% p.a.
    Performance Fee: 15.38% of any return greater than the Index***
  • INCEPTION DATE 19 March 2004
  • MANDATED 1 July 2017
  • BenchmarkMSCI World Total Return Index, Net Dividend Reinvested, in A$ ("Index")
  • NTA Post Tax ** A$ 1.257
    31/07/2020
  • NTA Pre Tax ** A$ 1.271
    31/07/2020
  • Price Close ** A$ 1.060
  • Shares On Issue ** 254.09m
  • Premium/Discount to pre-tax NTA ** -16.6%
  • DRP Yes

Portfolio Managers

Peter Baughan

Portfolio Manager

Jingyi Li

Portfolio Manager

Description

Pengana International Equities Limited (trading on the ASX as PIA) is the largest international ethical Listed Investment Company (“LIC”) on the ASX. PIA’s objective is to provide shareholders with capital growth as well as regular, reliable, and fully franked dividends.

The strategy aims to generate superior risk-adjusted returns, through investing in an actively managed portfolio of global companies that meet the investment team’s high-quality and durable growth criteria at reasonable prices. A robust ethical framework provides an added layer of risk mitigation.

These companies are identified through the conduct of fundamental research, with a long-term, global perspective, and must exhibit the following four key investment criteria: competitive advantages, quality management, financial strength, and sustainable growth potential.

EXPLORE OUR FUNDS

Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Fund
Axiom International Fund
Axiom International Fund (Hedged)
Axiom International Fund (Hedged)
Australian Equities Fund
Australian Equities Fund
High Conviction Property Securities Fund
High Conviction Property Securities Fund
Global Small Companies Fund
Global Small Companies Fund
WHEB Sustainable Impact Fund
WHEB Sustainable Impact Fund
Emerging Companies Fund
Emerging Companies Fund
High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
Pengana International Equities Limited (ASX: PIA)
Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
Alpha Israel Fund
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

1. As at the last day of last month prior to publishing of this report. Performance figures refer to the movement in net assets per share, reversing out the impact of option exercises and payments of dividends, before tax paid or accrued on realised and unrealised gains. 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.
2. Inception date of PIA: 19 March 2004, new investment team with new mandate adopted: 1 July 2017. Pengana International Equities Limited has been managed under the new investment mandate by the Pengana investment team since 1 July 2017. The performance since mandated in the table above refers to the movement in net assets per share since the new mandate adopted on 1 July 2017.

3. Annualised Standard Deviation since mandated
4. Relative to MSCI World Total Return Index, Net Dividends Reinvested
**As at the last day of last month prior to publishing of this report. The figures are unaudited.
*** Index/MSCI World refers to the MSCI World Total Return Index, Net Dividends Reinvested, in A$.