The Fund fell 2.9% in May, underperforming the Small Industrials by 1.2% and outperforming the Small Ordinaries by 0.3%. For the 12 months to May, the Fund was down 1.6%, outperforming the Small Industrials Index by 0.4% and outperforming the Small Ordinaries Index by 4.2%.
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 were mixed in May, with the US market up 0.7% despite falling markets in Europe and Asia. Chinese economic activity is spluttering following the bounce enjoyed following the re-opening in late 2022, driving the Chinese market down over 8% in the month. Offsetting this was a 6% rise in the tech sector (NASDAQ) in the US following a mini-boom in AI related stocks. The Australian market fell 2.6% as resources stocks felt the pain of the Chinese data, notwithstanding a 10% rise in local tech stocks. Consumer discretionary stocks were the worst performing sector following trading updates from Wesfarmers, and a range of smallcap retailers, who have noted a sharp contraction in activity as inflation and higher interest rates bite. We remain highly wary of this sector.
Our key contributors in May included:
Gentrack (+30%) rose sharply following another upgrade to earnings forecasts posted with the recent strong results. Kelsian (+11%) continues to rally based on its defensive revenue profile and natural hedge against inflation. Hansen Technologies (+10%) found new buying support in a month where NASDAQ outperformed the broader market. NIB Holdings (+9%) confirmed the earnings upside from the recent NDIS services operation. Technology One (+8%) posted a strong result including 25% profit growth and high confidence in future growth as its customers migrate to cloud based software packages.
Key detractors during May included:
Aussie Broadband (-16%) was soft without any obvious catalyst. G8 Education (-14%) has retraced recently, perhaps due to concerns over the rising wage levels in childcare given the current inflationary environment (which we believe can be offset with price increases). Lifestyle Communities (-11%) drifted after disclosing short term softness in new settlements, despite maintaining very strong medium term growth forecasts. ALS Group (-12%) posted a reasonable result however noted a slight softening in demand from the resources sector given a slowdown in Chinese economic activity. HUB 24 (-12%) has softened lately due to anaemic flows into managed funds given a broader risk aversion among domestic investors.