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Emerging Companies Fund

An Australian small caps fund with a 18+ year track record

July 2021 - Monthly REPORT

July Report

SUMMARY

The Fund rose 2.3% in July, outperforming the Small Industrials by 3.2% and outperforming the Small Ordinaries by 1.6%. For the 12 months to July, the Fund was up 49.3%, outperforming the Small Industrials Index by 17.4% and outperforming the Small Ordinaries Index by 17.0%.

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Jul 20211
1 MTH 1 YEAR 3 YEARS P.A. 5 YEARS P.A. 10 YEARS P.A. SINCE INCEPTION P.A.
Emerging Companies Fund 2.3% 49.3% 11.8% 11.9% 13.6% 13.8%
S&P/ASX Small Ordinaries Index 0.7% 32.3% 9.2% 9.6% 5.9% 5.8%
ASA Small Cap Industrials Index -0.9% 31.9% 9.3% 8.9% 10.1% 6.5%

Swipe horizontally to see all columns

COMMENTARY

The US market rose 2.4% in July driven by a strong reporting season, in stark contrast to the 14% fall in Chinese equities which suffered from fears of regulatory impacts from recent government announcements.

The Australian market rose 1.1% with mining stocks the key sector, rising 8.1% in line with base metals and lithium prices. The smallcap sector was mixed with mining stocks rising, and industrials drifting lower.

Takeover activity has featured within recent times with bids announced for Afterpay, Hansen Technologies, Huon Aquaculture, IRESS Technologies, Spark Infrastructure, and Sydney Airport. This is likely to continue given the favourable funding environment (record low-interest rates and a buoyant stock market).

Reporting season will keep us busy over August and September, and we look forward to direct contact with management teams from a wide range of industries and companies.

Our best performers in July included:
Johns Lyng (+12%) continues to rally after its profit upgrade in July. Mainfreight (+9%) saw further gains after posting very strong first-quarter trends continuing the outstanding growth posted through FY21. Lifestyle Communities (+9%) and Uniti Group (+5%) continued to find strength given their strong growth opportunities with limited economic sensitivity. Australian Clinical Labs (+14%) was floated in May to a muted response, which reversed in July given the realisation that elevated covid testing is likely to boost earnings into the medium term. Adore Beauty (+22%) had also been unfairly marked down earlier this year on the belief that its growth was solely due to covid, with this reversing rapidly in July.

Our worst contributors during July included:
HUB24 (-16%) and Netwealth (-9%) both drifted in July, partially giving up the very strong gains over the prior three months. Freelancer (-22%) was marked down following its interim result, which showed the core business growth was slightly below expectations. Propel Funerals (-5%) had risen over 20% in the prior three months, hence some retracement is not surprising, especially given the mild short-term impact on revenues from covid restrictions in NSW. City Chic (-3%) drifted following a 38% rally in the prior three months.

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

PORTFOLIO

Top Holdings (alphabetically)

AUB Group
Australia
Financials
Charter Hall Group
Australia
Real Estate
City Chic Collective
Australia
Consumer Discretionary
Hansen Technologies
Australia
Information Technology
Johns Lyng Group Ltd
Australia
Industrials
Lifestyle Communities
Australia
Real Estate
Mainfreight
New Zealand
Industrials
NZX Ltd
New Zealand
Financials
Pinnacle Investment Management
Australia
Financials
Uniti Wireless Ltd
Australia
Communication Services

PROFILE

Platform Availability

  • AET Wholesale Access Fund
  • Asgard Element (Masterfund)
  • Asgard Infinity
  • BT Investment Wrap
  • BT Super Wrap
  • BT Panorama
  • Colonial First Wrap -Super/pension
  • Centric IDPS
  • Centric Super
  • Hub24
  • IOOF Portfolio Service
  • IOOF Core
  • IOOF Pursuit Select
  • IOOF Grow Wrap
  • Macquarie Wrap
  • MLC Wrap/Navigator
  • Mason Stevens
  • Netwealth
  • OneVue
  • Praemium
  • uXchange
  • Wealthtrac

FEATURES

  • APIR CODE PER0270AU
  • REDEMPTION PRICEA$ 2.7873
  • FEES * Management Fee: 1.3340%
    Performance Fee: 20.5% of the performance above the benchmark
  • FUM AT MONTH END A$ 823.21m
  • 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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Axiom International Fund (Hedged)
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Australian Equities Fund
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High Conviction Property Securities Fund
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Global Small Companies Fund
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WHEB Sustainable Impact Fund
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Emerging Companies Fund
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High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
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Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
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Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

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.