The Fund rose 5.9% in June, outperforming the Small Industrials by 2.0% and outperforming the Small Ordinaries by 2.8%. For the 12 months to June, the Fund was up 50.1%, outperforming the Small Industrials Index by 17.1% and outperforming the Small Ordinaries Index by 16.9%. We are pleased with the performance during the financial year and note that since inception in 2004, we have outperformed the Small Industrial index in 13 of the 16 financial years.
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. 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.
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.
COMMENTARY
Markets were firm again globally in June, with the US market rising 2.3%, driven by a strong NASDAQ which rallied 5.5%. This caps off a very strong financial year, with the MSCI World index rising a remarkable 37.4%. Over the 12 months, the US market showed a 40.8% gain, with NASDAQ up 45.2% and the Russel 2000 (small-caps) eclipsing the broader market with a 62.0% gain.
The Australian market rallied 2.3% in June to round out a strong 12 month gain of 28.2%. Over the year, the local market was driven by financials, consumer, technology, and mining stocks, with healthcare, consumer staples, and energy underperforming. The smallcap sector gained 33.2% over the year.
Out key successes in June were:
Johns Lyng (+21%) posted an earnings upgrade which will result in earnings growth this year of over 25% due to improved organic growth and a boost in demand for repair works from recent heavy rains on the East Coast. Uniti Group (+11%) continues it strong run, showing a 94% gain over the six months. AUB Group (+15%) continues to rally on the ongoing positive outlook for insurance rates. Hansen Technologies (+17%) received a conditional takeover offer from BGH Group. City Chic (+17%) continued recent strength on the expectation of a return toward normal consumer spending in the US market.
Our key detractors in June were:
Collins Foods (-9%) released its full-year result which was in line with expectations, however, the outlook is somewhat clouded by potential cost inflation. Overall the strong market in June was driven by higher beta stocks, with more defensive stocks underperforming. This explains the short-term drift on a range of stocks that we own such as NZX (-7%), Australian Clinical Labs (-5%), Cleanaway (-4%), and EBOS (-4%).