The Fund fell 3.1% in March, underperforming the Small Industrials by 0.1% and underperforming the Small Ordinaries by 2.4%. For the 12 months to March, the Fund was down 11.6%, outperforming the Small Industrials Index by 1.2% and outperforming the Small Ordinaries Index by 1.6%.
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 globally were weak in March following the sudden bankruptcies of Silicon Valley and Signature Bank. These events called into question the stability of regional banks in the US and the potential for these banks to restrict lending to bolster capital reserves in the event of further large-scale withdrawals by panicked deposit holders. Any restriction in the availability of credit from this important source would coincide with quantitative tightening and higher interest rates to pressure economic activity further. The banking instability also hit property stocks globally, given the importance of regional banks in lending to property investments which may struggle to refinance at terms originally expected.
Mining stocks were boosted by a strong gold price and corporate activity. Gold stocks in Australia rose 19% in the month, while the lithium sector was buoyed by a takeover offer for Liontown Resources.
Our key positive contributors in March were:
Certain defensive stocks with conservative balance sheets like EBOS (+8%), EQT Ltd (+2%), and Propel Funerals (3%) were mildly positive in a month dominated by nerves around funding access. Chrysos (+22%) is a small investment for us which provides assay services to the gold sector. City Chic (+16%), another very small investment of ours, rallied as fears of pressure from its bankers faded.
Our key negative contributors in March were:
Charter Hall (-17%) and MA Financial (-11%) were hit given their exposure to property investments. While their balance sheets are highly conservative, the aversion to property investments given the US banking vulnerability saw a global rout in property stocks. Kelsian (-9%) made an investment in a high-quality US bus operator, with a resulting capital raising creating short-term indigestion. AUB Group (-8%) gave back ground after a 17% rally in February. NIB Holdings (-7%) has drifted lately on fears that higher medical claims inflation would pinch operating margins.