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Global Small Companies Fund

Specialists in a vast and growing investable universe

December 2020 - Monthly REPORT

A strong finish to 2020

SUMMARY

The Fund returned 3.3% in December, outperforming the benchmark return of 1.5%.

PORTFOLIO

Top Holdings (alphabetically)

Cerved Group Italy Financials Dino Polska Poland Consumer Staples 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 Dec 20201
1 Month1 Year2 Years P.A.3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund 3.3%9.6%14.7%6.0%10.7%8.9%
Benchmark 1.5%5.4%15.0%8.2%9.8%8.4%
1 Month1 Year2 Years P.A.3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund
3.3%
9.6%
14.7%
6.0%
10.7%
8.9%
Benchmark
1.5%
5.4%
15.0%
8.2%
9.8%
8.4%

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The Fund returned 3.3% in December, outperforming the benchmark return of 1.5%.

Global equity markets finished the year strong, capping off one of the most volatile years in recent memory. Despite the bleak backdrop of rising COVID-19 cases around the world, markets continued to surge on the hope that the end of the global pandemic was in sight. In the US, despite a record number of COVID-19 cases and political disarray, equity markets ended the year on a positive note.  Stocks rose, spurred by the rollout of multiple vaccines and the signing of another stimulus package.  The Federal Reserve’s commitment to low-interest rates continued to weigh on the US dollar as it continued to fall against the major currencies. In Europe, COVID-19 cases continued to rage and the discovery of a new more contagious strain of the virus in the UK moved the country back into full lockdown.  However, the UK was the first country in Europe to distribute vaccinations which helped buoy investor sentiment. The UK and European Union arrived at a last-minute Brexit agreement, averting any major trade disruptions going into early 2021.

Asian equity markets were positive despite a similar social backdrop as the rest of the world.  In China, the market rose but underperformed the region as sentiment was dampened somewhat by the continuity of US-China tensions. In December, the Trump administration blacklisted China’s top chipmaker, Semiconductor Manufacturing International Corp. (SMIC), China’s largest offshore oil and gas producer, China National Offshore Oil Corporation (CNOOC), and 60 other Chinese companies, claiming that they exploit US technology for malign purposes. Emerging equity markets enjoyed a strong end to 2020 by extending their healthy year-to-date gains. A weakening dollar helped emerging markets during the month.  Emerging markets outperformed developed markets in December as the MSCI EM was up over 7% while the MSCI World returned just over 4%. Small caps outpaced large caps globally as the MSCI ACWI Small Cap Index was up 7.5% while the MSCI ACWI was up 4.5%

Individual stock selection was the main driver of the Fund’s outperformance in December while currency was a positive driver.  Approximately 103 bps separated the top contributor and largest detractor.  As of 31st December, the top 10 holdings accounted for approximately 34% of the Fund’s assets, with the largest position of approximately 4.2% of the portfolio at the end of the month. Regional and sector exposure remained consistent month over month.  The Fund has outpaced the benchmark 11 out of the past 15 months.  Over the past year, the Fund’s upside capture has been 116% while the downside capture has been 99% vs. the benchmark generating approximately 4.1% of alpha.

Over the month several new positions were added, increasing the holdings in the Fund from 59 in November to 61 in December.  The Fund participated in the Bytes Technology initial public offering (IPO).  Bytes is primarily a software reseller based in the UK that also provides hardware and cloud services to customers principally in the UK and Europe. Within their product suite, they provide security, storage, and virtualization solutions, as well as licensing, digital transformation, and managed services to the public and private sectors. Bytes has established itself as a player in this space and is well position to grow as the move to digital transformation, cloud adoption, and work from home continues to trend upward. Bytes’ differentiator is that it is a founder operated business that has focused on the customer experience.  The customer base is diverse and loyal and accounts for over 90% of profits being generated by its existing client base.  Bytes has a strong track record of adding new customers and driving gross profit per customer. The shares rallied after the IPO based on good organic growth prospects.

Another portfolio addition, Hexpol, is a world-leading polymers group with strong global market positions in advanced polymer compounds.  The company manufactures rubber, plastic, and polyurethane components primarily for the automotive, construction, cabling, water treatment, pharmaceutical, energy, and oil industries.  The company announced their former CEO is returning to the firm.  He was responsible for significant value creation and we believe the company is well-positioned for a similar run under his direction.  Recently added, Concentrix is a U.S. based services company specializing in customer engagement and business performance.  The company has customer contact sites (call centers) that cover 70 languages, across 6 continents, from over 275 locations in the Americas, Asia-Pacific, and EMEA. They were spun out of Synex in December 2020.  The company is well-positioned to benefit from its sheer scale and omnichannel customer service.  Concentrix has a historic record of strong growth, it operates in a promising business area, and has grown its business from almost nothing 16 years ago to the second-largest player in its space globally. The Fund also initiated positions in three other companies in December.  We are excited about these opportunities and will provide additional details as we build up the positions.

The Fund exited positions in both Enghouse and Canada Goose after significant appreciation in their share prices. We have discussed both companies in detail in previous letters. The Fund also exited a small position in AMS as we lost confidence in the underlying business.

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
13%
NUMBER OF STOCKS
61
BETA4
0.76
MAXIMUM DRAW DOWN
-20.7%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.577
  • FEES * Management Fee: 1.1%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 128.01m
  • 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.