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Global Small Companies Fund

Specialists in a vast and growing investable universe

October 2020 - Monthly REPORT

New names and a notable exit

SUMMARY

The Fund returned -0.8% in October, underperforming the benchmark return of +1.4%.

PORTFOLIO

Top Holdings (alphabetically)

Brenntag AG Germany Industrials Cerved Group Italy Financials Kindred Group PLC Malta Consumer Discretionary NICE Information Service Korea, Republic Of Industrials TFI INTERNATIONAL INC Canada Industrials

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Oct 20201
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION
Fund -0.8%4.6%7.3%3.7%7.2%
Benchmark 1.4%-1.3%5.8%5.3%6.6%
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION
Fund
-0.8%
4.6%
7.3%
3.7%
7.2%
Benchmark
1.4%
-1.3%
5.8%
5.3%
6.6%

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The Fund returned -0.8% in October, underperforming the benchmark return of +1.4%.

October lived up to its expectations as a historically volatile month for equities. Global markets began the month on a positive note, with favourable corporate earnings sending stocks soaring.  The market hit a speed bump mid-month, as investors got skittish due to the global resurgence of COVID-19 cases, fear of more economic shutdowns, stalled U.S. fiscal stimulus, and anxiety over the U.S. election.  Those factors sent the global equity markets spiraling with the MSCI ACWI closing the month -2.41%.  U.S. equities trended lower for the second month in a row as risk-off sentiment grew due to U.S. politics and rising COVID-19 cases. Major U.S. indices closed the month in negative territory.  The feared second wave of the COVID-19 virus washed over Europe, with infection rates approaching and exceeding previous high levels in many areas.  New restrictions provide further obstacles to a full economic recovery.  Countries at the epicenter of the coronavirus resurgence in Europe were especially hard hit, with large losses across most developed European markets. Asian equities outperformed other regions led by China, Australia, and New Zealand.  Early restrictive measures in these and other Asian countries have not, so far, led to a resurgence of the infection and have helped establish a path to economic recovery.

Individual stock selection was the main driver of the Fund’s performance in October.  Increased volatility in the global equity markets was reflected in the Fund as approximately 171 bps separated the top contributor and largest detractor.  As of 31st October, the top 10 holdings accounted for approximately 34% of the Fund’s assets, with the largest position approximately 4% of the portfolio. Regional and sector exposure remained consistent month over month.  Positions over $2bn in market cap lagged the benchmark while positions under $2bn outperformed. The Fund has outpaced the benchmark 10 out of the past 13 months and 11 out of the last 17 months.  Over the past year, the Fund’s upside capture has been 123% while the downside capture has been 95% vs. the benchmark generating approximately 6.7% of alpha.

Over the month we added several new names to the portfolio.  The largest addition to the fund was Fusheng Precision, a leading Taiwanese manufacturer.  The company specializes in producing high-end golf clubs. With decades of experience in casting, forging, carbon fiber, forming, and continuously developing advanced materials, mechanisms, and engineering technologies, they have become a market leader within some of the world’s best golf club brands.   We believe the company will benefit from growth in its core business as well as in several new verticals.  There are a number of other new investments currently being scaled up which we will discuss in future letters.

A notable exit this month was Boohoo, a long-held investment for the Fund.  The UK-based online retailer’s recent concerns around their supply chain, change in auditor, and inability to move its listing to the LSE all factored in our decision to exit the position.

We are pleased to include below a recent investment update with Fund Manager Jon Moog.

PROFILE

Platform Availability

  • AMP North
  • Asgard eWrap
  • AET Wholesale Access Fund
  • BT Panorama
  • BT Wrap
  • Colonial First Wrap
  • Centric IDPS
  • Centric Super
  • Hub24
  • IOOF Pursuit
  • IOOF Portfolio Service
  • IOOF Core
  • Macquarie Wrap
  • Mason Stevens
  • MLC Navigator
  • MLC Wrap
  • Netwealth
  • Omniport(lifespan)
  • Powerwrap
  • Praemium
  • uXchange

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
12.8%
NUMBER OF STOCKS
54
BETA4
0.76
MAXIMUM DRAW DOWN
-20.7%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.4224
  • FEES * Management Fee: 1.1%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 111.32m
  • STRATEGY INCEPTION DATE 1 April 2015
  • BenchmarkMSCI All Country World SMID Cap Index unhedged in AUD

Fund Managers

Jon Moog

CIO and Portfolio Manager

Description

The Fund invests principally in small and midcap listed (or soon to be listed) global equities. Its investment objective is to obtain returns greater than the MSCI All Country World Index SMID Cap unhedged in Australian dollars (‘Index’) over rolling 3 year periods after fees. The Fund’s investment manager, Lizard Investors LLC, uses a value oriented investment approach that seeks to identify and invest in quality businesses that create significant value but are mispriced, overlooked, or out-of-favour. The investment manager believes that unique opportunities exist due to limited available research, corporate actions, or unfavourable investor perception.

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1. 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.
2. Inception 1st April 2015.
3. Annualised standard deviation since inception.
4. Relative to MSCI All Country World SMID Cap index unhedged in AUD.
* For further information regarding fees please see the PDS available on our website.