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%.
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.
Senior Fund Manager
Senior Fund Manager
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.
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.
