Global equity markets fell back in April, unwinding some of the strong March quarter gains. Economic data was mixed, and persistent US inflation led to investors pushing back the timing of expected interest rate cuts. US Core PCE inflation remained unchanged at 2.8% in March, as inflation heads gradually lower in most major economies. First quarter economic growth and March manufacturing activity slowed in the US, but retail sales grew a little faster than expected.
Meanwhile, Eurozone activity data indicated continued expansion and retail sales grew 0.7% year-on-year in March, up from a 0.7% contraction in February. Manufacturing activity in China continues to expand in response to government stimulus measures, although consumer spending remains weak, held back by the highly indebted residential property market.
The Fund continues to overweight information technology, consumer discretionary, and communications services while underweighting financials, energy, and materials.
The Fund benefitted from positive stock performance in health care and the overweight position in communications services. However, the overweight position in information technology and stock performance – especially in industrials and communications services – generally detracted from returns.
Growth stocks again underperformed value in April as interest rate sensitive stocks, in particular technology, were especially impacted by rising interest rate expectations. The Fund’s growth orientation therefore contributed to its underperformance relative to the benchmark.
The strongest contributor to relative returns in April was the Fund’s overweight position in US-based technology group Alphabet. It published first quarter revenue and earnings which were well ahead of market expectations, as its digital advertising and cloud computing businesses both performed strongly. It reported plans to better manage its cost base and announced that it would begin to pay a dividend.
The Swedish industrial group Atlas Copco also outperformed strongly in April. It reported first quarter orders which were well ahead of market expectations and announced strong forward guidance over the rest of this year.
US-based Uber Technologies underperformed despite announcing strong March quarter revenue and earnings, which were ahead of market expectations. However, second quarter gross bookings guidance was below consensus forecasts. Reports that Tesla would launch a robotaxi further weakened investor sentiment, even though this is unlikely to be launched for many years.
US-based technology consultancy Gartner underperformed after it reported that the value of its contracts grew less than expected during the first quarter. However, it increased earnings and cash flow guidance for the full year, which Axiom believes is still fairly conservative.
The Fund established a new position in US-based provider of critical infrastructure for data centres and communication networks, Vertiv. Its products are well positioned to help customers develop the data centres which are required to support AI innovation. Axiom expects this should help it expand margins by more than the 5.0% which the company is targeting.
A new position was also established in the Japan-based international department store chain Isetan Mitsukoshi. The company should benefit from Japan’s improving consumer sector and its rising inbound tourist numbers. Axiom expects this will support revenue growth above 10% per year, which is significantly more than the current market expectation.
The Fund exited its position in Hong Kong-based pan-Asian life insurance group AIA Group due to the ongoing economic uncertainty in China. It also exited US-based Idexx Laboratories which supplies specialised diagnostics equipment and software to veterinary practices, as Axiom’s forward data points showed slowing demand for veterinary services.
Axiom engaged with senior leadership of the Japan-based supplier to semiconductor manufacturers, Tokyo Electron in April. The company outlined how it is reducing scope 3 emissions, aims to reach net zero by 2050 and is incorporating ESG metrics into executive compensation. This led to the Fund increasing its position in the company.
Managing Director/Portfolio Manager
CEO/Chief Investment Officer
The Pengana Axiom International Fund invests in companies that are dynamically growing and changing for the better, more rapidly than generally expected and where the positive changes are not yet reflected in expectations or valuation.
The Global Equity Strategy seeks dynamic growth by concentrating its investments in global developed markets, and may also invest in companies located in emerging markets.
The investment manager is Axiom Investors, a Connecticut-based global equity fund manager formed in 1998 with over US$19billion in assets under Management.
Prior to June 2021, the Axiom Global Equity Strategy performance (shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Axiom Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. The simulation does not include the Pengana ethical screen. From June 2021 the strategy performance is the performance of the Pengana Axiom International Ethical Fund.
1. Axiom was appointed fund manager as of 5 May 2021. June 2021 represents the first full month of Axiom managing the Fund.
2. Inception date 1 July 2017. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund: APIR (HOW0002AU) in the table above which is the continuous performance of both the current and previous strategies.
3. Axiom Global Equity Strategy inception 1 Jul 2004.
4. Prior to June 2021, the Axiom Global Equity Strategy performance (labeled ‘Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Axiom Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. The simulation does not include the Pengana ethical screen. From June 2021 the strategy performance is the performance of the Pengana Axiom International Ethical Fund.
5. MSCI All Country World Total Return Index in AUD.
6. Performance for periods greater than 12 months are annualised. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. 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.
7. Annualised standard deviation since inception.
8. Relative to the MSCI All Country World Total Return Index in AUD.
*For further information regarding fees please see the PDS available on our website.
