The Fund fell 6.2% in October, outperforming the Small Industrials by 0.8% and underperforming the Small Ordinaries by 0.8%. For the 12 months to October, the Fund was up 0.9%, outperforming the Small Industrials Index by 7.0% and outperforming the Small Ordinaries Index by 6.0%.
We recently recorded a Portfolio and Investment Update webinar, which is available below for your review. CPD points are applicable for Australian Financial Planners 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
The US market fell 2.2% in October, capping off a weak three-month period where markets have fallen over 9% since July. Bond yields continued to rise, with US ten-year yields rising to around 5% from below 4% three months ago. This is due to concerns over the US debt position and potentially excessive fiscal strategies. The US economy has proven resilient to higher interest rates, prompting fears that this strong economic activity, fuelled by fiscal largesse, will prove inflation much harder to eradicate without further interest rate rises. A similar situation is seen in Australia, with persistent inflation and a tight labour market likely to stimulate further rate rises. Oil prices have retraced following a strong rally in the September quarter.
The Australian market fell 3.9%, while small caps fell 5.5% – resources stocks were stable, with most of the pain felt in industrial stocks.
Our positive contributors in October included:
Chrysos (+9%) won a major global deal with Barrick, which is a top 4 gold miner; a strong validation of the photon assay technology. Kelsian (+5%) provided an update at its AGM showing earnings growth in line with expectations, and a slight improvement in staff availability. Propel Funerals (+4%) revealed an informal takeover offer had been shown from private equity. Gentrack (+1%) bucked the weak market given its superior earnings growth outlook. Healthia (+1%), which is currently under a cash takeover offer, saw a mild drift upward as the deal comes nearer to closing.
Our negative contributors in October included:
Smartpay (-17%) drifted in a vacuum of company-specific information, with a competitor showing slightly softer earnings growth. Netwealth (-16%) revealed quarterly flows that were slightly below market expectations. Mainfreight (-13%) fell on fears of slower global trade volumes, however bounced strongly after month-end following a reasonably strong interim result in early November. Seven Group (-11%), retraced in a weak market having risen 83% in the past twelve months. EQT Holdings (-11%) fell in a weak market given its earnings leverage to equity markets.