Market Review
Global equity markets made strong gains across all major regions and sectors during February. The US performed particularly strongly, with the S&P 500 market index closing above 5,000 for the first time.
Emerging Markets also fared well as China stock prices rebounded upon the prospect of increased consumer spending during the lunar new year. Meanwhile, South Korea also delivered strong share market returns as its financial regulator launched a major initiative to improve corporate governance. In contrast, valuation levels in Europe outside the eurozone were little changed in aggregate.
Share market gains were led by strong performance in the consumer discretionary, information technology and industrial sectors. Index heavyweights such as NVIDIA, Microsoft, and Amazon.com – which announced strong earnings growth – boosted returns in the information technology and consumer discretionary sectors.
Utilities was the only sector to deliver a negative return in US dollar terms during February. Growth stocks comfortably outperformed value, with the fastest growing 20% of companies beating the slowest by over 7.0%.
Financial stocks performed well over the month, but New York Community Bank announced it had identified material weaknesses in internal controls related to how it monitors and assesses risk in its loan books. The company’s shares plummeted, suggesting the turmoil which has impacted some US regional banks may not have yet run its course.
Portfolio Commentary
The Fund again outperformed the benchmark during February. Strong performance by its holdings in communication services and financials, the overweight position in industrials and underweight positions in utilities, consumer discretionary, materials and energy boosted relative returns. Weaker performance by the Fund’s holdings in consumer discretionary, the overweight position in health care and the underweight in consumer discretionary were the main detractors from relative returns.
The Fund is focussed on identifying great companies through bottom-up analysis and continues to identify exciting opportunities in health care, communications services, and industrials, in which it maintains overweight positions.
The strongest contributor to relative returns during February was the overweight position in US-based technology group Meta Platforms which owns Facebook. The company reported its best quarterly sales growth in more than two years and announced its first-ever dividend. This follows its significant investment in AI tools which have improved the targeting of its digital advertisements, increasing their value to enterprise customers.
France-based digital automation and energy management group Schneider Electric was another major contributor to relative returns. It reported record revenue and free cash flow in 2023, which exceeded investor expectations.
The Fund’s holding in Japanese entertainment and consumer electronics company Sony was the largest detractor from relative returns in February. The stock underperformed after the company reported lower hardware sales of its PlayStation console and lower margins in its gaming business. Sony expects margins to improve next year and its long-term growth prospects remain positive.
The Fund sold its holding in US-based semiconductor developer NVIDIA in early February. Following the surge in stock price throughout 2023 and so far this year, the current market valuation now appears much less attractive. It reflects scant possibility of either a slowdown in the growth rate of artificial intelligence (AI) infrastructure spending or a shift in spending to its competitors. The mega-tech groups, which are NVIDIA’s biggest customers, continue to aggressively develop their own processors that could potentially impact NVIDIA’s sales.
However, NVIDIA outperformed strongly in February after announcing stronger than expected December quarter revenues and earnings. The Fund’s underweight position detracted from its relative returns during the month.
Harding Loevner believes generative AI will have a disruptive—and even profound—impact on businesses and employees across the global economy. Many of the Fund’s holdings are well positioned to benefit from this structural growth trend. However, few businesses are better placed than US technology group Microsoft to deliver next-generation solutions at immense scale. Accordingly, the Fund increased its position in the stock during February.
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.
