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Alpha Israel Fund

An Israeli equity fund investing in cutting edge technologies

March 2021 - Monthly REPORT

SEEKING COMPANIES WITH LONG-TERM GROWTH PROSPECTS

SUMMARY

The fund underperformed the Index during March.  Sectors that performed well for the Fund over the last year, such as Semiconductors and Cleantech, have struggled recently as more value-orientated sectors have outperformed.  These sectors, including Banks and Real Estate, underperformed during COVID-19 but are now recovering as Israel emerges from the effects of the pandemic.

This sector rotation was coupled with poor performance from some of the IPOs that the Fund participated in recently, including Human Xtensions (Robotic surgery), Axillion (Mobility AI), and Massivit (3D printing).  At such times we remind ourselves, and our investors, that we are long-term investors seeking companies with long-term growth prospects, and that such effects are only short-term in nature.

PORTFOLIO

Top Holdings (alphabetically)

Alony Hetz Properties Israel Real Estate Operating Companies FMS Enterprises Migun Israel Aerospace & Defense Nice Ltd Israel Application Software Peninsula Group Israel Specialized Finance Priortech Ltd Israel Electronic Components

Sector Breakdown

Capitalisation Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Mar 20211
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION1 MonthSINCE INCEPTION
Fund -0.9%24.9%14.9%12.7%11.2%
Benchmark 3.7%30.3%8.3%8.3%6.3%
Benchmark 1.6%66.9%14.8%5.5%3.3%
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION1 MonthSINCE INCEPTION
Fund
-0.9%
24.9%
14.9%
12.7%
11.2%
Benchmark
3.7%
30.3%
8.3%
8.3%
6.3%
Benchmark
1.6%
66.9%
14.8%
5.5%
3.3%

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The fund underperformed the Index during March.  Sectors that performed well for the Fund over the last year, such as Semiconductors and Cleantech, have struggled recently as more value-orientated sectors have outperformed.  These sectors, including Banks and Real Estate, underperformed during COVID-19 but are now recovering as Israel emerges from the effects of the pandemic.

This sector rotation was coupled with poor performance from some of the IPOs that the Fund participated in recently, including Human Xtensions (Robotic surgery), Axillion (Mobility AI), and Massivit (3D printing).  At such times we remind ourselves, and our investors, that we are long-term investors seeking companies with long-term growth prospects, and that such effects are only short-term in nature.

 

THE SEMI-CONDUCTOR INDUSTRY

This month’s newsletter focuses on the Semiconductor industry rather than an individual company.   All of the leading global high-tech companies now have operations in the field of chip development. Intel has always been involved, but in recent years Apple, Amazon, and Microsoft began to develop chips and recently, Google has also added these capabilities.  The internet giants have concluded that they are better off controlling the development of critical hardware themselves. The importance of self-development is both in providing better services to customers and saving energy expenditures.  All of these global players are strengthening their presence in Israel.

In addition, there are a number of domestic Israeli companies in the sector, many of which the Fund is invested in or has invested in previously.  Tower Semiconductor is a longstanding global giant in the field of Analog chips. Nova and Camatek are world leaders in the development and manufacture of the machines that perform the quality control tests of the chips, a critical link in the manufacturing process. Two years ago, one of the giants in the field of testing, KLA Corporation of California, acquired the veteran Israeli company Orbotech, for $3.4 billion. The world’s two largest chip development software companies, Sinopesis and Cairns, also have development centres in Israel.

Globally, and in Israel, the sector continues to grow. According to data from Applied Materials, in 2025 data centres will be responsible for the consumption of 15% of the world’s electricity consumption, up from only 2% in 2020.  Israel is well-positioned to continue to be at the forefront of the technological development in the sector.  It benefits from its status as an ally of the United States, is considered a relatively safe place in which to conduct business and has one of the most developed ecosystems outside of the United States and Europe.  Add up all these factors and it is unsurprising that Israel attracts significant external investment inflows and that its IT sector overall continues to flourish.

 

MACRO DEVELOPMENTS

The International Monetary Fund (IMF) recently released its revised macro-economic forecasts for the coming years. The publication notes that global GDP contracted 3.3% in 2020, representing a somewhat more moderate rate of contraction compared to the preliminary estimates.  Israel contracted only 2.5% in 2020, lower than the Global GDP average mentioned above and much better than many other developed economies around the world. The IMF has revised upward the 2021 growth forecast for Israel, which currently stands at 5.2%.

This comes against the backdrop of, amongst other things, the easing in pandemic-related restrictions and an increase in activity in the second half of 2020 in most regions of the world. Regarding economic activity in 2021-2022, the forecast reflects an increase in the degree of optimism within the IMF regarding some countries, particularly those countries that are succeeding to overcome morbidity through vaccinations, such as Israel. As of today, Israel has the highest rate of inoculations in the world at around 62%.  5.9m people have received at least one dose of the vaccine.

PROFILE

FEATURES

  • APIR CODE PCL6469AU (USD Class) CTS0045AU (AUD Class)
  • REDEMPTION PRICEClass A: A$1.2795
    Class B: U$1.3322
  • 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. 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 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.