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Monthly REPORT January 2021
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Pengana Australian Equities Fund

  Cashed-up consumers

Summary

The Australian stock market had a slow start to the new year, ending up 0.3% for the month of January 2021. In comparison, the Fund was down 0.9% for the same period.  For the 12 months to end January the Fund returned 3.1% compared to the market that yielded a negative -0.7%.  The RBA cash rate yielded 0.3% for the year.

The Australian stock market had a slow start to the new year, ending up 0.3% for the month of January 2021. In comparison, the Fund was down 0.9% for the same period.  For the 12 months to end January, the Fund returned 3.1% compared to the market that yielded a negative -0.7%.  The RBA cash rate yielded 0.3% for the year.

Global markets in the US and Europe were mostly down between 1% to 3% for the month, but Asian markets, in particular the Chinese MSCI, were very strong at 7.4% for the month.

The domestic Discretionary Retail, Communications, and Financials sectors performed strongly during the month whilst the defensive sectors, most notably REITS, Industrials, and Healthcare underperformed.  Companies exposed to discretionary spending released robust earnings upgrades courtesy of cashed-up consumer – the Covid induced stimulus and spending patterns certainly found its way into the local economy. As mentioned in previous newsletters we are cautious about extrapolating these trends past the potential “fiscal cliff” otherwise known as Jobkeeper payments ceasing in March. However, cyclically the current elevated revenue and profit levels may have some momentum given the January 2020 bushfire season (yes it does seem like a distant memory!) as well as the ultra-low interest rates. The large miners also upgraded as they benefited from a prolonged period of high commodity prices. Iron ore continued its very strong trajectory underpinned by Brazilian supply issues, sustained Chinese demand, and recovery of the European auto sector.

The Fund’s main contributors during January were Telstra, Super Retail, NAB, and Woolworths whilst Mirvac, Credit Corp, NIB Holdings, and Waypoint REIT retraced some of their prior periods’ gains to be the main detractors. The Fund added to existing positions in Amcor, Dalrymple Bay Terminal, and CSL. We trimmed our positions in Westpac, Cleanaway (the CEO announced his unexpected resignation), Accent Group, and Charter Hall. Cash levels at month-end were marginally above 5%. While the latter is definitely at the lower end of the Fund’s historical levels, we believe we have found a good balance between the low returns on offer in cash and compellingly priced hard assets.

Looking forward the half-year reporting season starts in February and is expected to provide substantial insight on gross margin expansion and operating leverage for the stronger companies. We anticipate that this should highlight the attractively priced companies that have been overlooked in a bifurcated market.

We remain focused on our investment methodology of using sustainable after-tax cash earnings yields generated by good business, managed by competent and honest management to craft our portfolio in a disciplined and conservative manner.

Top Holdings (alphabetically)

Accent Group Australia Consumer Discretionary
Credit Corp Australia Financials
CSL Australia Health Care
Evolution Mining Australia Materials
NAB Australia Financials
SG Fleet Australia Industrials
Super Retail Group Australia Consumer Discretionary
Telstra Australia Communication Services
Waypoint REIT Ltd Australia Real Estate
Woolworths Australia Consumer Staples
Accent Group
Consumer Discretionary Australia
Credit Corp
Financials Australia
CSL
Health Care Australia
Evolution Mining
Materials Australia
NAB
Financials Australia
SG Fleet
Industrials Australia
Super Retail Group
Consumer Discretionary Australia
Telstra
Communication Services Australia
Waypoint REIT Ltd
Real Estate Australia
Woolworths
Consumer Staples Australia

Sector Breakdown

Capitalisation Breakdown

Country Breakdown

Custom Sector Breakdown

Fund Performance NET PERFORMANCE FOR PERIODS ENDING 31 Jan 20211

1 Month1 Year3 Years P.A.5 Years P.A.10 Years P.A.SINCE INCEPTION
Fund -0.9%3.1%4.4%7.1%9.0%9.6%
RBA Cash Rate 0.0%0.3%1.0%1.2%2.1%2.6%
ASX Accumulation All Ordinaries Index 0.3%-0.7%7.7%10.5%7.9%6.4%
1 Month1 Year3 Years P.A.5 Years P.A.10 Years P.A.SINCE INCEPTION
Fund
-0.9%
3.1%
4.4%
7.1%
9.0%
9.6%
RBA Cash Rate
0.0%
0.3%
1.0%
1.2%
2.1%
2.6%
ASX Accumulation All Ordinaries Index
0.3%
-0.7%
7.7%
10.5%
7.9%
6.4%

Fund Performance NET PERFORMANCE SINCE INCEPTION2

Commentary

The Australian stock market had a slow start to the new year, ending up 0.3% for the month of January 2021. In comparison, the Fund was down 0.9% for the same period.  For the 12 months to end January, the Fund returned 3.1% compared to the market that yielded a negative -0.7%.  The RBA cash rate yielded 0.3% for the year.

Global markets in the US and Europe were mostly down between 1% to 3% for the month, but Asian markets, in particular the Chinese MSCI, were very strong at 7.4% for the month.

The domestic Discretionary Retail, Communications, and Financials sectors performed strongly during the month whilst the defensive sectors, most notably REITS, Industrials, and Healthcare underperformed.  Companies exposed to discretionary spending released robust earnings upgrades courtesy of cashed-up consumer – the Covid induced stimulus and spending patterns certainly found its way into the local economy. As mentioned in previous newsletters we are cautious about extrapolating these trends past the potential “fiscal cliff” otherwise known as Jobkeeper payments ceasing in March. However, cyclically the current elevated revenue and profit levels may have some momentum given the January 2020 bushfire season (yes it does seem like a distant memory!) as well as the ultra-low interest rates. The large miners also upgraded as they benefited from a prolonged period of high commodity prices. Iron ore continued its very strong trajectory underpinned by Brazilian supply issues, sustained Chinese demand, and recovery of the European auto sector.

The Fund’s main contributors during January were Telstra, Super Retail, NAB, and Woolworths whilst Mirvac, Credit Corp, NIB Holdings, and Waypoint REIT retraced some of their prior periods’ gains to be the main detractors. The Fund added to existing positions in Amcor, Dalrymple Bay Terminal, and CSL. We trimmed our positions in Westpac, Cleanaway (the CEO announced his unexpected resignation), Accent Group, and Charter Hall. Cash levels at month-end were marginally above 5%. While the latter is definitely at the lower end of the Fund’s historical levels, we believe we have found a good balance between the low returns on offer in cash and compellingly priced hard assets.

Looking forward the half-year reporting season starts in February and is expected to provide substantial insight on gross margin expansion and operating leverage for the stronger companies. We anticipate that this should highlight the attractively priced companies that have been overlooked in a bifurcated market.

We remain focused on our investment methodology of using sustainable after-tax cash earnings yields generated by good business, managed by competent and honest management to craft our portfolio in a disciplined and conservative manner.

Performance Table FUND PERFORMANCE (A$, NET OF FEES)

Year Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun FUND FYTD RBA CASH RATE FYTD ASX ALL ORDS FYTD
2020/2021 1.5%2%-2%1.5%10.2%2.3%-0.9%15%0.1%16%
2019/2020 3.2%0.6%1.4%-0.5%3.5%-3.3%2.3%-3.5%-19.5%8.5%6.2%0.1%-3.9%0.7%-7.2%
2018/2019 1.3%3.4%-2.5%-8%-1.6%-2%2.4%3.4%-1.1%2.9%4.9%1.2%3.6%1.5%11%
2017/2018 0.6%1%0.1%1.9%3.2%0.1%1.5%-1.3%-3%-0%2.5%1.5%8.1%1.5%13.7%
2016/2017 6.1%2.3%0.3%-3%-0.3%3.4%-0.8%0.7%1.8%1.7%-4.7%2.7%10.2%1.5%13.1%
2015/2016 3.3%-4.2%-0.6%4.1%3.4%0.2%-1.8%-3.2%3.1%0.7%4.6%-1.6%7.7%2%2%
2014/2015 1.9%1.5%-2.4%2.5%0%1.4%2.6%4%1.3%-1.7%1.1%-3.5%8.9%2.4%5.7%
2013/2014 2%2.3%1.4%2.3%-1.2%1.3%-2%1.4%-0.4%1.2%1.5%-1%9.1%2.5%17.6%
2012/2013 2.9%2.5%0.2%2.4%2.8%1.8%5.2%4.4%0%3.5%-1.3%-2.5%24%3.1%20.7%
2011/2012 -3.1%1.4%-2.4%4.7%-2.4%1%2.9%3.6%4.2%0.7%-1.1%-1.1%8.3%4.4%-7%
2010/2011 5.1%1.1%3.6%1.8%-0.1%3%0.7%1.5%1%0%-0.8%-0.5%17.4%4.7%12.2%
2009/2010 3.5%6.1%3.8%1.2%1%2.5%-3.6%1.1%3.6%-0.2%-4%-2.5%12.5%3.7%13.8%
2008/2009 -1%3.5%-4.7%-9%-5.3%3.9%0.2%-1.4%7.9%4.4%2.1%3.8%3%4.8%-22.1%

2020/2021

Jul 1.5%
Aug 2%
Sep -2%
Oct 1.5%
Nov 10.2%
Dec 2.3%
Jan -0.9%
Jan
Jan
Jan
Jan
Jan

2019/2020

Jul 3.2%
Aug 0.6%
Sep 1.4%
Oct -0.5%
Nov 3.5%
Dec -3.3%
Jan 2.3%
Feb -3.5%
Apr 8.5%
Mar -19.5%
May 6.2%
Jun 0.1%
FUND FYTD -3.9%
RBA CASH RATE FYTD 0.7%
ASX ALL ORDS FYTD -7.2%

2018/2019

Jul 1.3%
Aug 3.4%
Sep -2.5%
Oct -8%
Nov -1.6%
Dec -2%
Jan 2.4%
Feb 3.4%
Mar -1.1%
Apr 2.9%
May 4.9%
Jun 1.2%
FUND FYTD 3.6%
RBA CASH RATE FYTD 1.5%
ASX ALL ORDS FYTD 11%

2017/2018

Jul 0.6%
Aug 1%
Sep 0.1%
Oct 1.9%
Nov 3.2%
Dec 0.1%
Jan 1.5%
Feb -1.3%
Mar -3%
Apr -0%
May 2.5%
Jun 1.5%
FUND FYTD 8.1%
RBA CASH RATE FYTD 1.5%
ASX ALL ORDS FYTD 13.7%

2016/2017

Jul 6.1%
Aug 2.3%
Sep 0.3%
Oct -3%
Nov -0.3%
Dec 3.4%
Jan -0.8%
Feb 0.7%
Mar 1.8%
Apr 1.7%
May -4.7%
Jun 2.7%
FUND FYTD 10.2%
RBA CASH RATE FYTD 1.5%
ASX ALL ORDS FYTD 13.1%

2015/2016

Jul 3.3%
Aug -4.2%
Sep -0.6%
Oct 4.1%
Nov 3.4%
Dec 0.2%
Jan -1.8%
Feb -3.2%
Mar 3.1%
Apr 0.7%
May 4.6%
Jun -1.6%
FUND FYTD 7.7%
RBA CASH RATE FYTD 2%
ASX ALL ORDS FYTD 2%

2014/2015

Jul 1.9%
Aug 1.5%
Sep -2.4%
Oct 2.5%
Nov 0%
Dec 1.4%
Jan 2.6%
Feb 4%
Mar 1.3%
Apr -1.7%
May 1.1%
Jun -3.5%
FUND FYTD 8.9%
RBA CASH RATE FYTD 2.4%
ASX ALL ORDS FYTD 5.7%

2013/2014

Jul 2%
Aug 2.3%
Sep 1.4%
Oct 2.3%
Nov -1.2%
Dec 1.3%
Jan -2%
Feb 1.4%
Mar -0.4%
Apr 1.2%
May 1.5%
Jun -1%
FUND FYTD 9.1%
RBA CASH RATE FYTD 2.5%
ASX ALL ORDS FYTD 17.6%

2012/2013

Jul 2.9%
Aug 2.5%
Sep 0.2%
Oct 2.4%
Nov 2.8%
Dec 1.8%
Jan 5.2%
Feb 4.4%
Mar 0%
Apr 3.5%
May -1.3%
Jun -2.5%
FUND FYTD 24%
RBA CASH RATE FYTD 3.1%
ASX ALL ORDS FYTD 20.7%

2011/2012

Jul -3.1%
Aug 1.4%
Sep -2.4%
Oct 4.7%
Nov -2.4%
Dec 1%
Jan 2.9%
Feb 3.6%
Mar 4.2%
Apr 0.7%
May -1.1%
Jun -1.1%
FUND FYTD 8.3%
RBA CASH RATE FYTD 4.4%
ASX ALL ORDS FYTD -7%

2010/2011

Jul 5.1%
Aug 1.1%
Sep 3.6%
Oct 1.8%
Nov -0.1%
Dec 3%
Jan 0.7%
Feb 1.5%
Mar 1%
Apr 0%
May -0.8%
Jun -0.5%
FUND FYTD 17.4%
RBA CASH RATE FYTD 4.7%
ASX ALL ORDS FYTD 12.2%

2009/2010

Jul 3.5%
Aug 6.1%
Sep 3.8%
Oct 1.2%
Nov 1%
Dec 2.5%
Jan -3.6%
Feb 1.1%
Mar 3.6%
Apr -0.2%
May -4%
Jun -2.5%
FUND FYTD 12.5%
RBA CASH RATE FYTD 3.7%
ASX ALL ORDS FYTD 13.8%

2008/2009

Jul -1%
Aug 3.5%
Sep -4.7%
Oct -9%
Nov -5.3%
Dec 3.9%
Jan 0.2%
Feb -1.4%
Mar 7.9%
Apr 4.4%
May 2.1%
Jun 3.8%
FUND FYTD 3%
RBA CASH RATE FYTD 4.8%
ASX ALL ORDS FYTD -22.1%

STATISTICAL DATA FUND PORTFOLIO SUMMARY

VOLATILITY3 11.5% NUMBER OF STOCKS 36
BETA (USING DAILY RETURNS)4 0.62 MAXIMUM DRAW DOWN -23.1%
  • VOLATILITY 11.5%
  • BETA (USING DAILY RETURNS) 0.62
  • NUMBER OF STOCKS 36
  • MAXIMUM DRAW DOWN -23.1%

Fund Managers

Rhett Kessler

CIO and Senior Fund Manager

Anton du Preez

Deputy CIO and Fund Manager

Features

  • PORTFOLIO MANAGERS Rhett Kessler
    Anton du Preez
  • APIR CODE PCL0005AU
  • REDEMPTION PRICEA$ 1.8409
  • FEES * Management Fee: 1.025%
    Performance Fee: 10.25%
  • Minimum initial investment A$20,000
  • FUM AT MONTH END A$ 922.93m
  • STRATEGY INCEPTION DATE 1 July 2008
  • BenchmarkThe RBA Cash Rate Target plus Australian equity risk premium.

Description

The Pengana Australian Equities Fund aims to enhance and preserve investor wealth over a 5- year period via a concentrated core portfolio of principally Australian listed securities. The Fund uses fundamental research to evaluate investments capable of generating the target return over the medium term. Essentially, we are in the business of seeking to preserve capital and make money – we are not in the business of trying to beat the market. We remain focused on acquiring and holding investments that offer predictable, sustainable and well-stewarded after-tax cash earnings yields in excess of 6% that will grow to double digit levels as a percentage of our original entry price in five years. We believe that building a well-diversified portfolio of these “gifts that keep on giving” represents a meaningful way to create and preserve financial independence for our co-investors.

Explore our funds

International Fund High Conviction Property Securities Fund Australian Equities Fund International Ethical Fund
Global Small Companies Fund WHEB Sustainable Impact Fund Emerging Companies Fund High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA) International Fund - Ethical Opportunity Private Equity Trust (ASX: PE1) Alpha Israel Fund
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1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 1st July 2008.
3. Annualised standard deviation since inception.
4. Relative to ASX All Ordinaries Index.
*(including GST, net of RITC) of the increase in net asset value subject to the RBA Cash Rate & High Water Mark. For further information regarding fees please see the PDS available on our website.