The Fund rose 3.1% in July, underperforming the Small Industrials by 2.0% and underperforming the Small Ordinaries by 0.4%. For the 12 months to July, the Fund was up 17.2%, outperforming the Small Industrials Index by 4.5% and outperforming the Small Ordinaries Index by 7.9%.
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
Global markets were mixed in July with US stocks rising 1% notwithstanding a 1% fall in the NASDAQ. Markets remain heavily data driven, with each new data point seemingly creating a new set of expectations around interest rates and the outlook for the economy.
The Australian sharemarket rose 4.2% following a mild CPI release which softened expectations of a rate hike. Domestic discretionary retailers rose 12% in July, suggesting a view that the patchy retail environment may improve should rates remain stable or fall.
Early August has seen a spike in volatility globally, driven by fears of a harder landing in the US economy. While this volatility gained much media attention, the quantum of the moves so far does not constitute a collapse by any means. To illustrate, as at mid August, the US market has fallen less than 4% in the month. We anticipate short term volatility to continue, and remain wary of making bold assumptions on interest rates and economic activity given the clear uncertainty.
Our key positive contributors in July were:
EQT Holdings (+11%) and Charter Hall (+13%) both rallied due to the overall strength in investment markets which creates a tailwind for earnings. ALS Group (+10%) continues to rise on the expectation that the higher gold price will feed through to enhanced exploration activity. Technology One rose 11% following bullish medium term comments at its investor day. Mainfreight (+11%) rose despite a slightly softer Q1 trading update.
Our key negative contributors in July were:
Aussie Broadband (-8%) reacted to news that earnings would be impacted by higher costs associated with the loss of the Origin contract. Jumbo Interactive (-5%) drifted in a market otherwise focussed on more cyclical stocks. Lifestyle Communities (-23%) disclosed a further slowdown in settlements vindicating our earlier decision to dramatically reduce our exposure to the stock (our residual holding was very small, hence this event had minimal impact on performance). Cosol (-14%), a smaller position in the fund, drifted after a 30% rally in the prior three months.