The Fund rose 0.6% in October, outperforming the Small Industrials Index by 1.2% and underperforming the Small Ordinaries Index by 0.4%. For the 12 months to October, the Fund was up 48.3%, outperforming the Small Industrials Index by 20.8% and outperforming the Small Ordinaries Index by 17.3%.
View full commentary here.
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
Global markets were strong in October, with the US market rising 7.0% and European markets up 4.2%. This was a reversal of the trend in September and was driven by a strong reporting season and lower bond yields in the US. There remains risk around inflation and supply chain concerns however this did not dent investor confidence as the US market hit another all time high.
The domestic share market was flat with bond yields actually rising here as markets contemplate an end to ultra-easy monetary conditions. This pressured some industrial sectors, which had been boosted by low bond yields through 2021. Gold stocks rallied 10% as investors looked for a marginal hedge against inflation, which now seems more established than earlier estimated. This strength in gold is the key reason the small cap resources stocks outperformed industrials over the month.
Our key successes during October included:
Hansen Technologies (+14%) recovered after a sharp correction in September following the withdrawal of a takeover offer. MA Financial (+12%) announced an earnings upgrade due to faster than expected growth in assets management. Netwealth (+19%) and HUB 24 (+9%) both posted encouraging growth in funds under administration, further cementing market share gains from the traditional competitors. PSI Insurance (+9%) revealed a mild profit upgrade and announced a refinancing of their debt facility in order to fund future acquisitions.
Our key detractors in October included:
EML Payments (-24%) is a very small position in our portfolio and fell following a further announcement regarding a regulatory investigation into its Irish operation. AUB Group (-10%), Mainfreight (-7%), and City Chic (-5%) all drifted following very strong rallies in the prior six months. MacMillan Shakespeare (-6%) fell after a takeover offer for its competitor, Smart Group, was withdrawn.