Market Review
Global share markets rebounded strongly as inflation data eased across major developed economies. This enabled central banks to pause hiking interest rates and investors switched their attention towards lower rates next year. Market sentiment improved further as US-China relations appeared less frosty after Presidents Joe Biden and Xi Jinping met.
All global equity market regions and sectors (except energy) strengthened during November. The month saw a rotation of portfolios into growth stocks as interest rate expectations fell and energy prices dropped further. This particularly boosted the information technology sector, while strength in industrials may be a sign of improving consumer and business sentiment.
Falling oil prices as the US increased output, OPEC+ failed to agree meaningful production cuts and concerns grew about demand from China, weighed on the energy sector. In November stocks fared well across all major markets except China, which again lagged despite an improvement in retail sales and industrial production data.
Portfolio Comment
The Fund outperformed the benchmark during November, driven by its strong relative stock performance, especially in health care, communications services, and Europe more generally. The Fund’s overweight position in health care (which underperformed the broader market at an index level) and weak stock performance in consumer discretionary were the main detractors from relative returns.
Shares of Netherlands-based payment processing firm Adyen recovered from a sell-off in the previous quarter. This followed the company reiterating its long-term strategy and competitive advantage at its 8 November investor day. The company projected that it would deliver annual revenue growth in the low-to-high 20% range through 2026. This validated the Fund’s assessment that Adyen’s technological edge and superior digital payments platform will drive increasing market share in a fast-growing industry. Furthermore, it forecast that from next year it will gradually expand EBITDA margins, which are anticipated to exceed 50% by 2026.
Strong third-quarter earnings results were published by US-based international streaming and production company Netflix and US-based image-sharing and social media platform Pinterest. Both stocks outperformed, driving strong stock performance in the Fund’s communication services holdings.
In the Consumer Staples sector, the Fund holds France-based L’Oréal, which is the world’s largest cosmetics company. It outperformed after the company’s display of its beauty technologies on its capital markets day impressed investors.
The Fund’s stock performance was strongest in Europe, with outperformance particularly strong inside the eurozone. In addition to Adyen, France-based digital automation and energy management group Schneider Electric, and Germany-based multinational software company SAP outperformed upon reporting strong third-quarter earnings results.
Stock performance in the US detracted from relative returns in November. Biopharmaceutical group Vertex Pharmaceutical which focuses on cystic fibrosis treatments underperformed following strong share price gains this year. Meanwhile, energy services business Schlumberger underperformed upon weaker oil prices.
As we move into the final month of the calendar year we will look to deliver a ‘year in review’ in early 2024. Please let us know any questions you would like us to cover, either specific to the sector, Portfolio, or any portfolio holdings below.
Portfolio Manager
Portfolio Manager
Portfolio Manager
An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.
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The Pengana Harding Loevner International Fund invests in high-quality, growing companies identified through fundamental research with a long-term, global perspective.
Pengana has appointed Harding Loevner to managed the Fund. Harding Loevner is a New Jersey-based global equity fund manager formed in 1989 with over US$86billion in Assets under Management.
Harding Loevner’ analysts search the world for companies that meet their high quality and durable growth criteria, conduct fundamental research, then value and rate their stocks to make them available to PMs for investment.
1. Harding Loevner was appointed fund manager as of 10 May 2021. June 2021 represents the first full month of Harding Loevner managing the Fund.
2. Class B Inception date 1 July 2015. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund (APIR PCL0026AU) in the table above which is the continuous performance of both the current and previous (shaded) strategies.
3. Harding Loevner Global Equity Strategy inception 1 Dec 1989
4. Prior to June 2021, the Harding Loevner Global Equity Strategy performance (labelled ‘Current Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Harding Loevner Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of Class B. From June 2021 the strategy performance is the performance of the Pengana Harding Loevner International Fund Class B.
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. The Harding Loevner Global Equity Strategy performance (shown in the shaded area in the chart, and in the performance table as row labeled ‘Harding Loevner Global Equity Strategy) has been simulated by Pengana from the monthly gross returns of the Harding Loevner 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. Strategy Inception 30 November 1989.
8. Annualised standard deviation since inception.
9. Relative to MSCI All Country World Total Return Index in AUD
* For further information regarding fees please see the PDS available on our website.
