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Alpha Israel Fund

An Israeli equity fund investing in cutting edge technologies

November 2021 - Monthly REPORT

Covid continues to exert influence

SUMMARY

The Fund rose 0.8% (Class A) and 1.2% (Class B) in November, underperforming the Tel Aviv Stock Exchange 125 Index, which rose 1.4%.  On the last day of the month Israeli indices declined by 1.5%, in line with many other equity indices around the globe, in response to concerns regarding the Omicron coronavirus variant.  Many questions remain unanswered regarding the new variant’s severity and the effectiveness of current vaccines.  Until these questions are answered equity markets are likely to remain fragile.

PORTFOLIO

Top Holdings (alphabetically)

Airport City Ltd
Israel
Diversified Real Estate Activities
Alony Hetz Properties
Israel
Real Estate Operating Companies
Ilex Medical
Israel
Health Care Distributors
Kenon Holdings Ltd
Singapore
Independent Power Producers & Energy Traders
Priortech Ltd
Israel
Electronic Components

Sector Breakdown

Capitalisation Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Nov 20211

Alpha Israel Fund Class A (AUD)

1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. SINCE INCEPTION P.A.
Alpha Israel Fund Class A 0.8% 6.0% 6.4% 11.8% 9.3%
Tel Aviv Stock Exchange 125 Index 1.4% 29.2% 9.7% 10.0% 9.6%

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Alpha Israel Fund Class B (USD)

1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. SINCE INCEPTION P.A.
Alpha Israel Fund Class B 1.2% 7.4% 9.7% 13.4% 10.5%
Tel Aviv Stock Exchange 125 Index 1.4% 29.2% 9.7% 10.0% 9.6%

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Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The main contributors during the month were Ilex Medical, Priortech, Kenon Holdings and Fox Group.  Ilex Medical rose 23% thanks to the hype surrounding coronavirus testing and their excellent 3rd quarter results (see below).  Priortech continues to grow and expand its production capabilities.  More significant however is the market’s growing recognition of the value of Priortech’s ownership of Zhuhai Access Semiconductor Co, a Chinese semiconductor company.  We believe this is Priortech’s “hidden gem” and will benefit directly from China’s stated intent to be self-sufficient in semiconductor production.

The main detractors this month were the disruptive technology stocks, which detracted circa 2% from the Fund’s overall performance.  This segment now amounts to approximately 5% of the Fund, representing 6 companies.  We are confident in these positions and remain patient investors, believing that their potential will be recognised by the broader market in time.

Stock in Focus

Ilex Medical is the Fund’s biggest position at circa 5.5%.  Ilex is one of Israel’s leading companies in the medical diagnostics field and specializes in marketing, selling and supporting equipment, disposables and reagents to laboratories and healthcare establishments. Ilex is closely affiliated with leading multinational medical conglomerates like Abbott, Hologic and Grifols which provide a forefront solution in medical fields such as microbiology, blood banking, Hematology coagulation, I.V.F and more.

The Coronavirus epidemic has accelerated the company’s growth and at the same time allowed it to develop new growth engines in the field of medical equipment, bidding on HMO (health maintenance organisation) tenders and investing in innovative start-ups. The company continues to present record results with an excellent quarter indicating growth in all parameters.   EBITDA in the quarter increased by 72% compared to last year and amounted to USD37.5million.  Net profit attributed to shareholders in the quarter increased by 69% compared to last year and amounted to USD27million.

Macro Developments

According to the OECD report published at the end of November, Israel’s GDP growth will be 6.3% in 2021, up from 5% in its last forecast. Israel’s Ministry of Finance is more optimistic and predicts growth of over 7% in 2021. In its November 22 meeting, the Monetary Committee of the Bank of Israel (BoI) decided to keep the central bank interest rate unchanged at 0.1%.

The OECD wrote, “The progressing booster vaccination campaign, a gradually recovering labor market, and fading uncertainty will support domestic demand. Strong growth of high-tech services exports will continue. The recovery could be slower if the health situation deteriorates again, or the increase in inflation is stronger or more persistent than assumed in the projections. Growth could be stronger if accumulated savings are withdrawn more quickly.”

The OECD forecasts growth of 4.9% in Israel in 2022, up from 4.5% in its previous forecast, and sees growth of 4% in 2023.

PROFILE

FEATURES

  • APIR CODE PCL6469AU (USD Class) CTS0045AU (AUD Class)
  • REDEMPTION PRICEClass A: A$1.1689
    Class B: U$1.3255
  • FEES * Management Fee: 1.50% p.a. paid monthly in arrears
    Performance Fee: 20% above the Hurdle with a high water mark, paid semi-annually in arrears
  • Minimum initial investment $250,000
  • STRATEGY INCEPTION DATE 1 January 2018
  • BenchmarkThe goal of the Fund is to achieve long term capital growth by investing In Israeli and Israeli related companies, generating returns that consistently outperform the relevant benchmarks. Returns are not guaranteed.

Fund Managers

Gabi Dishi

Founder & CEO

Michael Weiss

Founder & Managing Partner

Aviran Revivo

Managing Partner

Sagi Ben Yosef

Managing Partner

Description

The Pengana Alpha Israel Fund invests in listed Israeli companies that produce cutting edge – both high and low tech – technologies. These Israeli listed companies have developed solid intellectual property coupled with strong global distribution.

The Fund offers Australian investors diversification within global equity exposure to a unique and promising market that is very much skewed to industries and technologies that are either limited, or do not exist, in the Australian market place, such as: the semiconductor industry, solar and water treatment technology, aerospace and electronic defence industries, and cyber security technologies.

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1.Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Performance figures are calculated using net asset values after all fees and expenses, and assume reinvestment of distributions. Index returns shown are in ILS (Israeli Shekel). No allowance has been made for buy/sell spreads.  Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 1st January 2018.
3. Annualised Standard Deviation since inception
4. Relative to Tel Aviv Stock Exchange 125 Index

Please note: This fund is only open to Wholesale Investors.