The Fund rose 2.7% in March, underperforming the Small Industrials by 0.8% and underperforming the Small Ordinaries by 2.1%. For the 12 months to March, the Fund was up 18.1%, underperforming the Small Industrials Index by 2.3% and outperforming the Small Ordinaries Index by 4.3%.
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 rose a further 3.1% in March, capping off a phenomenal five month run – up 28% since the October lows. Nasdaq has risen over 30% from the lows indicating a mild outperformance of tech stocks. US ten year bond prices also rose in March driven by the sense that rate cuts may still eventuate later this year – an assumption that may prove too bullish if wage inflation remains elevated.
Australian shares rallied 3.3% in March with mining stocks mildly outperforming. The gold price rose 9% in March to all-time highs, while copper and oil prices also moved higher. Offsetting this, iron ore drifted 12% which dragged local producers’ share prices down.
Takeover activity continues to be a major theme in the Australian market – long term buyers seem to see value where it is currently not captured by shorter term investors. Bids were received in March for A2B (Cabcharge), Mermaid Marine, and McGrath Real Estate. The three largest domestic building material stocks (Ad Bri, Boral, and CSR) are all currently under takeover offers.
Our key positive contributors in March were:
Webjet (+27%) posted a strong trading update on its investor day, and confidence that the value of travel booked on its hotel booking engine can double in the medium term. ALS Group (+10%) is seeing volumes under pressure in its mining division, however a new record high in gold prices should see a bounce in volumes as junior explorers raise and deploy capital. Genex Power (+36%) received a takeover offer from J Power which currently holds 7% of the company. NIB Holdings (+9%) had a weak February based on a slightly soft result, however bounced quickly in March to reverse those losses. Catapult (+23%) continues to gain attention as a global growth story and recently expanded its contract with the NRL.
Our key negative contributors in March were:
Aussie Broadband (-21%) lost its largest white-label broadband customer, Origin Energy, which leaves an unexpected 15% gap in earnings. There were a range of other stocks which have performed well in the last six months which drifted over March for no specific reason in a strong market including Propel Funerals (-3%), AUB Group (-2%), Audinate (-10%), and Carsales (-1%).