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Emerging Companies Fund

An Australian small caps fund with a 15+ year track record

April 2022 - Monthly REPORT

April Report

SUMMARY

The Fund fell 2.8% in April, underperforming the Small Industrials by 0.7% and underperforming the Small Ordinaries by 1.3%. For the 12 months to April, the Fund was up 7.1%, outperforming the Small Industrials Index by 12.9% and outperforming the Small Ordinaries Index by 4.2%.

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Apr 20221
1 MTH 1 YEAR 3 YEARS P.A. 5 YEARS P.A. 10 YEARS P.A. SINCE INCEPTION P.A.
Emerging Companies Fund -2.8% 7.1% 11.4% 11.3% 13.1% 13.1%
S&P/ASX Small Ordinaries Index -1.5% 2.9% 7.6% 9.6% 6.0% 5.5%
Outperformance -1.3% 4.2% 3.7% 1.7% 7.2% 7.6%
ASA Small Cap Industrials Index** -2.1% -5.8% 3.6% 7.1% 8.3% 5.7%
Outperformance -0.7% 12.9% 7.8% 4.3% 4.8% 7.4%

Swipe horizontally to see all columns

COMMENTARY

The US market fell nearly 9% in April following a further rise in short-term bond yields due to the growing pressure on interest rates from inflation. This saw highly valued stocks (especially technology) fall sharply, with a skew towards stable sectors such as utilities, transport, staples, etc. The Australian market fell only 0.9% due to its relatively low exposure to technology companies and higher exposure to stable industries at more reasonable valuations. Smallcap stocks in Australia fell 1.5% with mining stocks mildly outperforming industrials. Corporate activity continues to be a theme in the local market, with a $20bn all-cash bid for Ramsay Healthcare announced in April.

Our key positive movers in April were:
Uniti Group (+5%) rose as the takeover offer moves closer to completion. Aussie Broadband (+5%) was firm, however in early May suffered from a minor downgrade to growth forecasts. Insurance brokers performed well in April given their defensive business models – AUB Group (+2%), PSC Insurance (+2%) and Steadfast (+8%). Johns Lyng (+3%) found further favour due to the high volume of catastrophe response work from the NSW/QLD floods.

Our key negative movers in April were:
Stocks which derive their earnings from assets prices and markets suffered in April during the volatility with MA Financial (-14%), Charter Hall (-5%) and Pinnacle (-10%) all drifting lower. EML Payments (-47%), which is a very small holding of ours, was harshly dealt with following a downgrade to earnings due to slippage in their European operations. Lifestyle Communities (-11%) fell on fears that its medium-term earnings growth may be impeded if residential house prices were pressured by higher interest rates. Hansen Technologies (-5%) drifted in sympathy with the global technology sector despite being very resilient and modestly valued.

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

PORTFOLIO

Top Holdings (alphabetically)

AUB Group
Australia
Financials
AUB Group Limited provides financial services. The Company offers equity-based risk management, insurance broking, and specialist underwriting agencies, as well as focuses on risk solutions for clients and strengthening our partners risk advisory capabilities.
Aussie Broadband Pty Ltd
Australia
Communication Services
Aussie Broadband Ltd provides communication services. The Company offers internet, mobile data, and other telephony services. Aussie Broadband serves customers in Australia.
Carsales Com LTD
Australia
Communication Services
carsales.com Ltd owns and operates a portfolio of automotive and related industry websites, including an automotive classifieds website.
Charter Hall Group
Australia
Real Estate
Charter Hall Group invests in and develops real estate. The Company manages real estate investment funds and develops commercial, residential, and industrial properties.
EBOS Group Ltd
New Zealand
Health Care
EBOS Group Limited supplies and distributes medical consumable products and equipment to the hospital and primary care sectors of the New Zealand and Australian healthcare markets. The Company's products include diagnostic instruments, surgical instruments and prosthesis, feminine protection, anesthetic equipment, and other consumer products.
EQT HOLDINGS LTD
Australia
Financials
Equity Holdings Limited provides personal trust and financial services to customers in Australia. Services include will and estate planning, trustee for settlements, financial guardian, investment and property management and fund investments. Other services provided by the company include income tax services, short term share trading and mortgage loans and investments.
Hansen Technologies
Australia
Information Technology
Hansen Technologies Limited develops, supports and integrates billing systems software for the telecommunications and utilities sectors in Australia. The Company also provides IT outsourcing services such as facilities management and develops software and services for workforce management.
Healius Ltd
Australia
Health Care
Healius Limited provides health care services. The Company offers diagnostic imaging, pathology, acute and chronic disease treatment, dental and eye care, and in vitro fertilisation services. Healius serves patients in Australia.
MA Financial Group Ltd
Australia
Financials
MA Financial Group Ltd provides corporate advisory, equities, and asset management services. The Company focuses on merger and acquisition, divestments, equity and debt raising, equities research, capital management, and recapitalization. MA Financial Group serves customers worldwide.
Uniti Wireless Ltd
Australia
Communication Services
Uniti Group Limited provides broadband solutions. The Company offers internet access and other related services. Uniti Group serves customers in Australia.

PROFILE

FEATURES

  • APIR CODE PER0270AU
  • REDEMPTION PRICEA$ 2.6726
  • FEES * Management Fee: 1.3340%
    Performance Fee: 20.5% of the performance above the benchmark
  • FUM AT MONTH END A$ 831.25m
  • STRATEGY INCEPTION DATE 1 November 2004
  • BenchmarkS&P/ASX Small Ordinaries Accumulation Index

Fund Managers

Ed Prendergast

Senior Fund Manager

Steve Black

Senior Fund Manager

Description

The Pengana Emerging Companies Fund combines the skills of highly experienced small company investors (collectively over 45 years’ experience) with a limited fund size and an objective of providing above market returns over the medium term. Our benchmark is the S&P/ASX Small Ordinaries Accumulation Index. The fund managers Steve Black and Ed Prendergast are part owners of the business and investors in the Fund, providing a strong incentive to perform. The Fund has strong research ratings from all major research houses and over the period since its inception has delivered returns well above benchmark.

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1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 1 November 2004.
* For further information regarding fees please see the PDS available on our website.
** The Fund does not invest in resource stocks.