The Fund fell 1.7%1 in September, outperforming the Small Industrials by 0.6% and outperforming the Small Ordinaries Indices by 1.1%1. For the 12 months to September, the Fund was down 5.7%1, underperforming the Small Industrials Index by 1.0%1 and underperforming the Small Ordinaries Index by 2.4%.
We are pleased to include below a recent investment update with Fund Manager Steve Black.
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
The Fund fell 1.7%1 in September, outperforming the Small Industrials by 0.6% and outperforming the Small Ordinaries Indices by 1.1%1. For the 12 months to September, the Fund was down 5.7%1, underperforming the Small Industrials Index by 1.0%1 and underperforming the Small Ordinaries Index by 2.4%.
Global markets retraced over September, following a remarkable five-month rally from the March lows. Such a breather is not surprising, with exuberance tempered by the US election uncertainty and a rise in the reported positive cases of Covid in Europe. The US market fell 3.9%, with tech stocks falling 5.2%.
With the ongoing economic impact of lockdowns, stimulus measures are critical to saving economies from further catastrophe. These stimulus measures also aid financial markets due to increased liquidity and improved sentiment. Governments globally have maintained a “whatever it takes” approach, however short-term wrangling in the US (esp leading into the election) has created a sense that some stimulus may be delayed or impinged. The US election will likely further distract markets for weeks.
The other critical driver of markets is the search for an approved, viable vaccine (or more than one). While potential vaccines offer hope, this theme is highly uncertain. Over 200 groups are pursuing the prize, with a small number currently in human trials. There is no guarantee that any of them will pass these trials by proving effective without serious side effects. Further, there is uncertainty around their effectiveness, and hence the extent to which a vaccine will actually impact on the rate of spread of covid.
The Australian market fell 3.8% in September with healthcare the only sector to rise (being somewhat defensive, and a potential beneficiary of a vaccine). The energy sector fell over 10% in line with oil prices, given the impact of low fuel demand from travel and commuting. Smallcap stocks fell less than the overall market with a 2.8% retracement.
Since the market low in March, we have delivered 56% compared to the Small Industrials sector which has risen 49%. Currently, the smallcap market feels quite buoyant notwithstanding the global uncertainty. We are busier with IPOs than we have been for over three years. While we always treat IPOs with a higher level of caution given their lack of track record, there have been a small number of highly promising, high growth businesses which we have made initial investments in.