Following a strong rebound in April, the Fund delivered an encouraging return of +6.7% in the month of May1. By way of comparison, the ASX 300 Accumulation Index increased by +4.6% in May. As at 31 May, the Fund had recovered 17% since the end of March, with the positive momentum continuing in the early weeks of June.
Following a strong rebound in April, the Fund delivered an encouraging return of +6.7% in the month of May1. By way of comparison, the ASX 300 Accumulation Index increased by +4.6% in May. As at 31 May, the Fund had recovered 16% since the end of March, with the positive momentum continuing in the early weeks of June.
During March we witnessed the market respond to an environment where the magnitude of the impact of Covid 19 was unknown, and in many cases, survivability was being questioned. The ensuing lack of visibility and confidence resulted in a share market correction that it would now appear overshot on the downside. Throughout April investors were able to better assess the depth of the economic shutdown, a series of capital raisings largely solved the survivability question, and focus turned to the shape of the recovery to come.
May is being referred to by some market participants as the month in which the world economy re-opened, and the discretionary led strong ASX performance suggests that going into the month, investors had been too pessimistic on the domestic economy. Throughout May, consumer confidence levels improved substantially, supported by government stimulus, and a re-opening trajectory began to take shape.
The Fund was well positioned for this environment, entering May with a relatively high level of equity exposure (cash levels c5%), and having not only held but added to our overall exposure to discretionary names which include Super Retail Group, Kathmandu and Bapcor – the three largest positive contributors to the Fund’s performance for the month.
Whilst encouraged, we remain cautious on the sustainability of the growing levels of consumer confidence. Particularly as we approach a period where various stimulus measures roll off, and the true underlying levels of unemployment emerge.
That said, we believe the right discretionary exposures (such as those identified above) have the business models to continue to perform well in that environment. Furthermore, the fund continues to enjoy the benefit of re-shaping the portfolio during the downturn, with strong contributions continuing from high quality additions such as BHP, RIO and Ramsay Health Care.
As flagged previously, we will continue to invest in companies for the long-term, and are willing to make an exception for non-payment of dividends in the short term given the exceptional circumstances. Importantly, our fund will continue to pay quarterly dividends, although possibly at a lower rate for the remainder of calendar 2020.
Fund Manager and Investment Analyst
Fund Manager and Investment Analyst
The strategy invests in a high conviction portfolio of Australian listed securities with sustainable and growing income streams. The Fund targets capital preservation over supernormal returns, through a consistent focus on the security selection process and careful management of portfolio exposure. The Fund seeks to generate consistent returns with a high component of the return from income, using fundamental company research to uncover investment opportunities. The Fund is managed by the Pengana Australian Equities team.
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. A new strategy was implemented from 1 August 2017 by the Pengana team. The financial information refers to this strategy. For full performance history of the prior strategy please refer to the Pengana website.
3. Annualised standard deviation since inception.
4. Relative to ASX 300 Accumulation Index.
* For further information regarding fees please see the PDS available on our website.
