Global share markets delivered positive returns again in March. Economic data remained reasonably positive and moderating inflation supported expectations of interest rate cuts later this year.
US Core PCE inflation fell to 2.8% in February as pricing pressures continued to gradually ease across major developed economies. In signs of a broadening recovery, US consumer confidence, retail sales and industrial production all improved in February. Meanwhile, European share markets made gains, as the fall in retail sales moderated to 0.7% year-on-year. China’s manufacturing sector continued to expand, although weak consumer spending and the highly leveraged real estate sector continued to slow economic activity, leaving local share markets little changed in March.
The Fund continues to overweight information technology, consumer discretionary and communications services, while underweighting financials, energy and materials.
The Fund benefitted from positive stock performance in information technology and the overweight position in communications services. However, stock performance – especially in financials and healthcare – generally detracted from returns. Growth stocks underperformed value in March as the share market recovery broadened, after outperforming strongly during the first two months of the year. The Fund’s growth orientation therefore led to it underperforming the benchmark. The Fund’s zero weight in energy and materials, the underweight in financials and overweight in information technology further detracted from returns.
The strongest contributor to relative returns in March was again the overweight position in US-based semiconductor developer Nvidia. The company announced its new Blackwell B200 GPU, the world’s fastest chip which will cost nearly double the current H100. Moreover, the Fund’s analysis of industry forward data points indicates that demand for servers continues to accelerate.
US-based global technology group Alphabet also outperformed strongly. It announced that it is in talks with Apple to integrate Google’s Gemini AI model into future iPhones. This would reduce the risk of losing search engine market share to AI-powered competitors such as OpenAI. Google currently pays Apple US$20 billion per year to be the default search engine on iOS devices.
US-based content creation and publishing software company Adobe underperformed after announcing first quarter earnings, which although strong, disappointed some investors. OpenAI also previewed a new text-to-video tool Sora, which is seen by some as a competitive threat. However, Axiom believe that Adobe’s potential to accelerate earnings growth in the second half of 2024 is not reflected in the current market valuation.
The Fund’s overweight position in US-based producer of animal medicines and vaccinations Zoetis also detracted from relative returns in March. Vet surgery foot traffic decelerated and safety concerns have been raised regarding its pain relief drug Librela. However, these appear manageable and it should do well in the US, having been successful in Europe.
The Fund continued to increase its position in US-based streaming and production group Netflix, which was first established in January. It expects the company to increase subscribers faster than consensus market forecasts in the March quarter and the new advertising-supported membership product will help drive long-term subscription growth.
The Fund also added to its holding in Taiwan-based semiconductor manufacturer TSMC after the company reported monthly revenue growth ahead of expectations. This should enable earnings to grow faster than forecast in the March quarter.
The Fund reduced its holding in Hong Kong-based China life insurer AIA Group. Investor caution towards Chinese stocks, as economic activity levels remain subdued, continues to drag on the stock’s performance, despite its strong fundamentals.
The position in Japanese entertainment and electronics group Sony was also reduced following the disappointing forward earnings guidance which accompanied recent quarterly earnings. However, PlayStation 5 console revenue expectations now appear more achievable.
No new positions were established in March but the sale of the holding in US-based global automotive and clean energy company Tesla was completed. The company continues to be forced to cut prices globally as industry data indicates slowing demand for electric vehicles.
Managing Director/Portfolio Manager
CEO/Chief Investment Officer
The Pengana Axiom International Fund (Hedged) invests in companies that are dynamically growing and changing for the better, more rapidly than generally expected and where the positive changes are not yet reflected in expectations or valuation.
The Global Equity Strategy seeks dynamic growth by concentrating its investments in global developed markets, and may also invest in companies located in emerging markets.
The investment manager is Axiom Investors, a Connecticut-based global equity fund manager formed in 1998 with over US$19billion in assets under Management.
1. From 4 June 2021 the capital component of the foreign currency exposure for the Fund is hedged back to Australian dollars.
2. Axiom was appointed fund manager as of 5 May 2021. June 2021 represents the first full month of Axiom managing the Fund.
3. Inception date 1 July 2017. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund: APIR (HHA0002AU) in the table above which is the continuous performance of both the current and previous strategies.
4. Axiom Global Equity Strategy inception 1 Jul 2004.
5. Prior to 1 June 2021, the Axiom Global Equity Strategy performance (labeled ‘Current Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross USD returns of the Axiom Global Equity strategy. The Axiom Global Equity Strategy performance does not include the Pengana ethical screen
6. Prior to 4 June 2021 hedged performance has been simulated by Pengana for both the Fund and Index. This was done by: 1) using 3 month rolling forwards to hedge movements in the AUD/USD spot rate, and 2) deducting the Pengana International Ethical Fund (Hedged) management fee of 1.35% p.a. from the Fund’s performance.
From 4 June 2021, index performance is from the MSCI All Country World Total Return in AUD (Hedged). Prior to 4 June 2021, index performance is simulated from the MSCI All Country World Total Return in USD
7. 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.
8. Annualised standard deviation since inception.
9. Relative to the MSCI All Country World Total Return in AUD (Hedged).
*For further information regarding fees please see the PDS available on our website.
