The Fund rose 3.4%1 in January, underperforming the Small Industrials by 0.7% and in line with the Small Ordinaries Indices. For the 12 months to January, the Fund was up 23.2%1, underperforming the Small Industrials Index by 0.4%1 and outperforming the Small Ordinaries Index by 4.4%1.
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 globally were rattled by the coronavirus in January. The US market fell 0.2%, while the Hang Seng fell 6.7% due to its more direct exposure. Commodity markets were hit on fears of a slowdown induced by the illness – oil fell 16.4% and copper fell 9.5%. Bond markets rallied on the expectation that any disruption to growth would place further downside pressure on interest rates.
The Australian share market bucked the trend, rising 4.7%, driven by healthcare stocks such as CSL, and interest rate sensitive stocks (property, telcos, etc) which benefited from the bond market strength.
The domestic economy is still patchy, however it contains mild promise over the coming 12 months. Lower interest rates, and more relaxed lending activity has seen house prices back to the prior peak, which should flow through to improved consumer spending and building activity following the downturn in 2019. The two potential emerging negatives are a slowdown in travel activity (coronavirus) and any lingering effect of the recent bushfires.
The 33% fall in Nearmap shares in January (a stock we have never owned) is a salient reminder of the risks of baking in too much long term growth in early stage businesses. The stock has fallen 60% from its peak in July 2019, at which point it was capitalised at $2bn, despite never having reported a profit.
We look forward to results season in February, which gives us a chance to meet with management teams from existing and potential investments.