The Fund fell 0.1% in May, outperforming the Small Industrials by 0.5% and underperforming the Small Ordinaries by 0.4%. For the 12 months to May, the Fund was up 42.3%, outperforming the Small Industrials Index by 17.2% and outperforming the Small Ordinaries Index by 15.6%.
Senior Fund Manager
Senior Fund Manager
The Pengana Emerging Companies Fund combines the skills of highly experienced small company investors (collectively over 45 years’ experience) with a limited fund size and an objective of providing above market returns over the medium term. Our benchmark is the S&P/ASX Small Ordinaries Accumulation Index. The fund managers Steve Black and Ed Prendergast are part owners of the business and investors in the Fund, providing a strong incentive to perform. The Fund has strong research ratings from all major research houses and over the period since its inception has delivered returns well above benchmark.
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 1 November 2004.
* For further information regarding fees please see the PDS available on our website.
** The Fund does not invest in resource stocks.
COMMENTARY
Markets continued a positive trend over May, despite a further correction in tech stocks. Inflation fears continue to dominate sentiment, however, bond markets were calmer during May. Gold rallied 8% as a result of inflation, and an unwind of the speculative froth seen in other asset classes such as Bitcoin which fell 36% in May. Australian stocks rose 2.3% driven by a 7.3% run in banks and strength in the gold sector. Tech stocks suffered a 10% correction in line with the global trend.
Our key positive contributors in May were:
Uniti Group (+8%) continued to strengthen as the market appreciates the high-quality nature of the income streams and growth opportunity (the stock has rallied 75% this year so far). Propel Funerals (+17%) announced it would internalise the management structure, which removes a complicated structure and also removes the need for any future performance fees. Mainfreight (+4%) released its full-year result in May showing 27% profit growth and further dispelling fears that interruption to global supply chains would negatively impact the business. Lifestyle Communities (+5%) continues to find favour given low-interest rates add an element of tailwind to an otherwise high-quality business model. Swoop (+139%) was an IPO we participated in (a small investment for us) which has a highly experienced management team in the telco industry looking to grow its wireless broadband offering.
Our key negative contributors in May were:
EML Payments (-42%) was blindsided by a review by the Irish Central Bank, which is investigating potential anti-money laundering breaches on one of the company’s card operations. While the likelihood of a fine or restrictions on this division’s operations cannot be ruled out, this was more than allowed for in the fall in value. Hansen Technologies (-7%) drifted in line with tech stocks, however, we note the stock has risen 20% in early June having received a takeover offer. AUB Group (-5%) is a large investment in our fund which drifted on no particular fundamental news. Australian Clinical Labs (-11%) is an IPO in which we invested a small position in, and disappointingly drifted in the aftermarket (note the stock posted an earnings upgrade in early June with highly encouraging operating trends). Aussie Broadband (-19%) was weak, however, posted an encouraging earnings upgrade in late May reminding the market of the strong growth potential.