Last year proved once again, in dramatic fashion, that investors should not try to predict short term market performance. The Fund benefitted from having multiple strategies within the same portfolio, specifically Growth as well as Value, which allowed us the flexibility to move within our universe of companies (both domestic and global) in a market that was characterized by high variability.
The Fund also benefitted from our out-of-the-money put option protection, a discipline we have adhered to over the life of the Fund. These options protect investors against catastrophic falls, which, as usual, may strike without warning
Positive equity market momentum from the last quarter of 2020 continued into January. Vaccine-related progress in Israel and expected economic improvement, globally and domestically, combined to place the Israeli market in a strong position going into the new year.
There was a remarkable divergence between two segments of the Israeli market over 2020. On the one hand, Israeli stocks with predominantly global sources of revenue outpaced the broader benchmark, whilst Israeli stocks with predominantly domestic sources of revenue underperformed. The divergence in P/E ratios across these segments is currently at a 5-year high, with domestically orientated stocks trading at a P/E ratio of 14x compared to 28x for globally orientated stocks. Part of the justification for this is that globally orientated stocks demonstrate more growth potential, with the majority of them trading on the Nasdaq. However, an alternative explanation is that while Technology, Biotech, and green energy stocks fared quite well after the initial shock of the coronavirus, traditional value sectors like Financials, Energy, and Real Estate did not. Historically, following every period in which this divergence has occurred, there has been a strong recovery by the domestic orientated stocks.
This combination of relatively low P/E ratios and relative underperformance signals that the market may not have fully priced in an economic recovery in Israel in 2021 and beyond. At the same time, Israel is leading the world in vaccinations (currently over 3.2 million people) and expects its population to be fully vaccinated by the end of Q1 2021.
Last year proved once again, in dramatic fashion, that investors should not try to predict short-term market performance. The Fund benefitted from having multiple strategies within the same portfolio, specifically Growth as well as Value, which allowed us the flexibility to move within our universe of companies (both domestic and global) in a market that was characterized by high variability.
The Fund also benefitted from our out-of-the-money put option protection, a discipline we have adhered to over the life of the Fund. These options protect investors against catastrophic falls, which, as usual, may strike without warning
Despite a rocky start, Israel experienced record capital market activity in 2020, with an unprecedented number of IPOs valued at more than $9 billion raised on public markets in Israel, the US and other worldwide exchanges. This is an impressive increase from the $2.2 billion raised in 2019. The IPO pipeline for 2021 is arguably the strongest-ever, with more than 10 Israeli “unicorns” (privately owned businesses valued at more than $1bn) that have taken steps towards either an IPO or acquisition via a SPAC (special-purpose acquisition company).
Our increased exposure to Pre-IPO investments has also generated significant investment performance.
The increase in public listings of private companies is highly positive for the Fund, both as local investors in technology-oriented companies with long-term growth potential, as well as due to our large shareholding in Israel’s leading underwriter “Poalim IBI” (traded under the symbol PIU on the Israeli stock exchange). In the last quarter of 2020, we participated in several IPOs of this kind and will maintain our investments in those that we believe have long-term potential. Two such companies are GenCell and Human Xtensions, which, in our opinion, have the potential to increase in value significantly in the coming years.
GenCell is engaged in the field of alternative energy and provides power supply and storage solutions for remote stations via hydrogen fuel cell-based generators. The company’s main growth potential comes from its products that use ammonia-free hydrogen, which is a breakthrough in the fields of Energy and Technology.
Human Xtensions develops robots for non-invasive surgical procedures. They allow the surgeon to perform complicated actions by imitating his hand movements and accurately transferring them remotely to the surgeon’s tools. These robots represent a significant upgrade on the current technology and can be used for a wide range of surgeries performed today via traditional methods. The robots’ price is relatively low compared to the main alternative, the da Vinci Surgical System. This costs about $2.5 million and requires a long training period compared to about $100,000 for the Human Xtensions’ device.
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Doral Group Renewable Energy R | Israel | Renewable Electricity |
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Human Xtensions Ltd | Israel | Health Care Equipment |
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Peninsula Group | Israel | Specialized Finance |
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Priortech Ltd | Israel | Electronic Components |
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Telsys | Israel | Technology Distributors |
1 Month | 1 Year | 2 Years P.A. | 3 Years P.A. | SINCE INCEPTION | |
---|---|---|---|---|---|
Fund Class A (AUD) | 1.8% | 9.9% | 18.6% | 13.1% | 12.5% |
Fund Class B (USD) | 2.1% | 15.9% | 20.5% | 14.3% | 13.6% |
Tel Aviv Stock Exchange 125 Index |
3.6% | -0.7% | 7.2% | 4.9% | 5.8% |
Tel Aviv Stock Exchange Small And Medium Cap 60 Index |
10.6% | 21.6% | 12.5% | 2.1% | 2.7% |
Positive equity market momentum from the last quarter of 2020 continued into January. Vaccine-related progress in Israel and expected economic improvement, globally and domestically, combined to place the Israeli market in a strong position going into the new year.
There was a remarkable divergence between two segments of the Israeli market over 2020. On the one hand, Israeli stocks with predominantly global sources of revenue outpaced the broader benchmark, whilst Israeli stocks with predominantly domestic sources of revenue underperformed. The divergence in P/E ratios across these segments is currently at a 5-year high, with domestically orientated stocks trading at a P/E ratio of 14x compared to 28x for globally orientated stocks. Part of the justification for this is that globally orientated stocks demonstrate more growth potential, with the majority of them trading on the Nasdaq. However, an alternative explanation is that while Technology, Biotech, and green energy stocks fared quite well after the initial shock of the coronavirus, traditional value sectors like Financials, Energy, and Real Estate did not. Historically, following every period in which this divergence has occurred, there has been a strong recovery by the domestic orientated stocks.
This combination of relatively low P/E ratios and relative underperformance signals that the market may not have fully priced in an economic recovery in Israel in 2021 and beyond. At the same time, Israel is leading the world in vaccinations (currently over 3.2 million people) and expects its population to be fully vaccinated by the end of Q1 2021.
Last year proved once again, in dramatic fashion, that investors should not try to predict short-term market performance. The Fund benefitted from having multiple strategies within the same portfolio, specifically Growth as well as Value, which allowed us the flexibility to move within our universe of companies (both domestic and global) in a market that was characterized by high variability.
The Fund also benefitted from our out-of-the-money put option protection, a discipline we have adhered to over the life of the Fund. These options protect investors against catastrophic falls, which, as usual, may strike without warning
Despite a rocky start, Israel experienced record capital market activity in 2020, with an unprecedented number of IPOs valued at more than $9 billion raised on public markets in Israel, the US and other worldwide exchanges. This is an impressive increase from the $2.2 billion raised in 2019. The IPO pipeline for 2021 is arguably the strongest-ever, with more than 10 Israeli “unicorns” (privately owned businesses valued at more than $1bn) that have taken steps towards either an IPO or acquisition via a SPAC (special-purpose acquisition company).
Our increased exposure to Pre-IPO investments has also generated significant investment performance.
The increase in public listings of private companies is highly positive for the Fund, both as local investors in technology-oriented companies with long-term growth potential, as well as due to our large shareholding in Israel’s leading underwriter “Poalim IBI” (traded under the symbol PIU on the Israeli stock exchange). In the last quarter of 2020, we participated in several IPOs of this kind and will maintain our investments in those that we believe have long-term potential. Two such companies are GenCell and Human Xtensions, which, in our opinion, have the potential to increase in value significantly in the coming years.
GenCell is engaged in the field of alternative energy and provides power supply and storage solutions for remote stations via hydrogen fuel cell-based generators. The company’s main growth potential comes from its products that use ammonia-free hydrogen, which is a breakthrough in the fields of Energy and Technology.
Human Xtensions develops robots for non-invasive surgical procedures. They allow the surgeon to perform complicated actions by imitating his hand movements and accurately transferring them remotely to the surgeon’s tools. These robots represent a significant upgrade on the current technology and can be used for a wide range of surgeries performed today via traditional methods. The robots’ price is relatively low compared to the main alternative, the da Vinci Surgical System. This costs about $2.5 million and requires a long training period compared to about $100,000 for the Human Xtensions’ device.
VOLATILITY3 | 11.2% | NUMBER OF STOCKS | 36 |
BETA (USING DAILY RETURNS)4 | 0.55 | MAXIMUM DRAW DOWN | -13.6% |
VOLATILITY3 | 10.6% | NUMBER OF STOCKS | 36 |
BETA (USING DAILY RETURNS)4 | 0.51 | MAXIMUM DRAW DOWN | -11.4% |
Founder & CEO
Founder & Managing Partner
Managing Partner
Managing Partner
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.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Class A is shown in $AUD, Class B is shown in $USD, Benchmarks 1&2 are $ILS. 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
Benchmark 1: Tel Aviv Stock Exchange 125 Index
Benchmark 2: Tel Aviv Stock Exchange Small And Medium Cap 60 Index
Please note: This fund is only open to Wholesale Investors.