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Axiom International Fund

An option of HEDGED or UNHEDGED portfolios of dynamic and growing companies undergoing positive change, within a robust ethical framework.

July 2021 - Monthly REPORT

A rotation to durable growth areas

SUMMARY

During July 2021, the Pengana Axiom International Ethical Fund (“Fund”) delivered 7.6% for investors, outperforming the benchmark’s return of 2.8%.

We are pleased to announce that two Australian research houses have now completed their reviews of the Fund since the appointment of the new investment team and the Fund has received a Recommended rating from Zenith as well as a Superior rating from SQM. The reports are available to AFSL holders HERE.

The portfolio continues to overweight information technology, consumer discretionary and communication services, and underweight financials, materials, and consumer staples. In July, we added capital to health care and reduced communication services and consumer discretionary. We started new positions in automaker Volkswagen and dental aligner leader Align Technologies. More detail in the commentary below.

 

PORTFOLIO

Top Holdings (alphabetically)

Adobe Inc
United States
Information Technology
Alphabet Inc
United States
Communication Services
Amazon
United States
Consumer Discretionary
Asml Holdings
Netherlands
Information Technology
Danaher
United States
Health Care
Facebook Inc
United States
Communication Services
Microsoft
United States
Information Technology
Moderna Inc
United States
Health Care
PayPal
United States
Information Technology
Tesla Inc
United States
Consumer Discretionary

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 30 Jul 20216

Pengana Axiom International Fund

The Class was established in 1 July 2017. From June 2021 Axiom was appointed as the investment manager for the Fund.

1M
Since
Axiom Appointed
June 20211
1Y 3Y
Since Fund
Inception
July 20172
5Y
Since Strategy
Inception
July 20043
Fund: APIR (HOW0002AU)1,2

Managed by Axiom from June 2021
7.6% 17.3% 34.5% 17.7% 16.3%
Current Strategy (Partial Simulation)4

Axiom Global Equity Strategy
34.2% 20.9% 21.2% 19.6% 9.5%
Index5 2.8% 7.4% 29.9% 14.1% 14.7% 14.6% 8.1%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION6

COMMENTARY

During July 2021, the Pengana Axiom International Ethical Fund (“Fund”) delivered 7.6% for investors, outperforming the benchmark’s return of 2.8%.

The Fund outperformed in July due largely to security selection especially in the areas of health care and information technology. The pick-up in infections of the Delta variant of the COVID virus sparked a market rotation away from recovery plays to durable growth areas, serving as a tailwind to the Fund. Interest rates continued to decline from March highs as growth peaked in the second quarter and inflation fears alleviated.

Along with these tailwinds, the Fund generated outperformance from top holding Moderna, which contributed nearly 200 bps of alpha in the month. The stock not only benefited from rising COVID infections, but also from continued new contracts with countries to provide their vaccine – fully booking out 2021 and substantially firming 2022 deliveries. Investors are now appreciating the under forecasting of revenues in consensus models for the coming years as the vaccine proves to be more durable than just a one-year phenomenon.

Danaher Corporation in the biologic contract manufacturing space was another top five alpha contributor that benefitted from the increased appreciation of vaccine sales durability.

Finally, ASML Holdings and Alphabet had positive reactions to strong second quarter results. ASML is seeing significant order activity for their next generation lithography tools as customers ramp up capex to address semiconductor shortages, while strong digital advertising spending drove a big beat on revenues and margins at Google.

On the other hand, Amazon and Paypal results showed a trend of slowing ecommerce sales, with Amazon also cutting their profitability expectations. Axiom downgraded the rating for Amazon to a B1 and Paypal to A1 and reduced position sizes.

The portfolio continues to overweight information technology, consumer discretionary and communication services, and underweight financials, materials, and consumer staples.

In July, we added capital to health care and reduced communication services and consumer discretionary. We started new positions in automaker Volkswagen and dental aligner leader .Align Technologies

With the capital raised from sales in large positions Moderna, Facebook, Amazon and Paypal, the Fund initiated positions in global automotive market share leader Volkswagen with a B1 rating and dental aligner market share leader Align Technologies with a B2 rating. Volkswagen sells 10.7 million cars annually with brands serving all areas of mass, premium, ultra-luxury, niche and commercial vehicles. The company has been a share gainer and has improved margins ahead of expectations, while also exponentially growing its Electric Vehicle (EV) business. It is becoming increasingly apparent that VW’s investments in EVs will proliferate the company to be one of the largest EV producers by 2025 as their initial products deliver better than average ranges, in-line charging speeds and come at lower selling prices versus peers. Given the positive revisions, cheap valuation and acceleration of growth, the stock has the potential to migrate to a high B2 rating over time meriting investment. Align Technology pioneered the market for clear dental aligners with a significant head start and has continued to deliver strong growth despite introductions over the last three years of competing products. Clear aligners have penetrated approximately fifteen percent of the annual orthodontic case opportunity, while 90% of cases can be treated with clear aligners. Consensus forecasts fade the accelerating growth rates the business has seen in the last few quarters creating a dynamic gap. The potential positive revisions, high growth rates and average valuations compared to historic levels make Align an attractive investment.

PROFILE

Platform Availability

  • Asgard eWrap
  • BT Investment Wrap
  • BT Panorama
  • BT Superwrap
  • Colonial First Wrap -IDPS
  • Centric IDPS
  • Hub24
  • IOOF Grow Wrap
  • Macquarie Wrap -IDPS
  • Macquarie Wrap -Super
  • Mason Stevens – IDPS
  • Mason Stevens – Super (Hedged)
  • Netwealth
  • Powerwrap

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY7
9.2%
NUMBER OF STOCKS
47
BETA8
0.73

FEATURES

  • APIR CODE HOW0002AU
  • REDEMPTION PRICEA$ 3.1821
  • FEES * Management Fee: 1.35% p.a
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 390.68m
  • STRATEGY INCEPTION DATE 1 July 2004
  • BenchmarkMSCI All Country World Total Return Index (net, AUD)

Fund Managers

Bradley Amoils

Managing Director/Portfolio Manager

Andrew Jacobson

CEO/Chief Investment Officer

Description

The Pengana Axiom International Fund invests in companies that are dynamically growing and changing for the better, more rapidly than generally expected and where the positive changes are not yet reflected in expectations or valuation.

The Global Equity Strategy seeks dynamic growth by concentrating its investments in global developed markets, and may also invest in companies located in emerging markets.

The investment manager is Axiom Investors, a Connecticut-based global equity fund manager formed in 1998 with over US$19billion in assets under Management.

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

Prior to June 2021, the Axiom Global Equity Strategy performance (shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Axiom Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. The simulation does not include the Pengana ethical screen. From June 2021 the strategy performance is the performance of the Pengana Axiom International Ethical Fund.

1. Axiom was appointed fund manager as of 5 May 2021. June 2021 represents the first full month of Axiom managing the Fund.
2. Inception date 1 July 2017. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund: APIR (HOW0002AU) in the table above which is the continuous performance of both the current and previous strategies.
3. Axiom Global Equity Strategy inception 1 Jul 2004.
4. Prior to June 2021, the Axiom Global Equity Strategy performance (labeled ‘Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Axiom Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. The simulation does not include the Pengana ethical screen. From June 2021 the strategy performance is the performance of the Pengana Axiom International Ethical Fund.
5. MSCI All Country World Total Return Index in AUD.
6. Performance for periods greater than 12 months are annualised. 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.
7. Annualised standard deviation since inception.
8. Relative to the MSCI All Country World Total Return Index in AUD.
*For further information regarding fees please see the PDS available on our website.