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Emerging Companies Fund

An Australian small caps fund with a 15+ year track record

August 2021 - Monthly REPORT

August report

SUMMARY

The Fund rose 8.5% in August, outperforming the Small Industrials by 2.4% and outperforming the Small Ordinaries by 3.5%. For the 12 months to August, the Fund was up 49.1%, outperforming the Small Industrials Index by 21.3% and outperforming the Small Ordinaries Index by 19.6%. We were busy with reporting season in August, and are pleased that our largest positions showed very strong results.

View full commentary here. 

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Aug 20211
1 MTH 1 YEAR 3 YEARS P.A. 5 YEARS P.A. 10 YEARS P.A. SINCE INCEPTION P.A.
Emerging Companies Fund 8.5% 49.1% 12.7% 13.0% 14.9% 14.3%
S&P/ASX Small Ordinaries Index 5.0% 29.5% 10.1% 11.0% 6.7% 6.1%
Outperformance 3.5% 19.6% 2.6% 2.0% 8.2% 8.1%
ASA Small Cap Industrials Index** 6.1% 27.8% 9.9% 10.3% 11.0% 6.8%
Outperformance 2.4% 21.3% 2.8% 2.7% 3.9% 7.4%

Swipe horizontally to see all columns

COMMENTARY

Global markets were strong again in August, with the US market up 3% and most global markets rising. Bond yields fell during the month, aiding equity markets. The Fed’s commentary at the Jackson Hole meeting indicated that the process of QE tapering may begin soon, which will have implications should it eventuate given how critical this boosted liquidity has been for markets over the past 18 months. The Australian market rose 2.5% driven by a supportive results season, with tech stocks especially strong following the takeover of Afterpay, and a dramatic bounce in Wisetech, which achieved its growth forecasts. Mining and energy stocks were the only weak spots in the local market with iron ore prices falling 25% on concerns of slower demand from China.

Our best performers in August included:
Uniti (+24%) posted 50% EPS growth and revealed it was growing ahead of original expectations. MA Financial (Moelis) rose 46%, while Pinnacle Investments rose 32% after announcing faster growth in funds under management than originally expected. Mainfreight (+16%) posted first quarter profit growth of 83% as the shortage of global shipping capacity favoured its air and freight operations. Aussie Broadband (+40%) beat its prospectus forecasts and remains well positioned to take market share through its superior service model.

Our worst performers in August included:
Integral Diagnostics (-13% ) posted a reasonable result, however it foreshadowed higher than expected capital expenditure, which mildly spooked the marginal investor. Freelancer (-18%) is a very small investment for us, and suffered following lower than expected growth in their core business. Adore Beauty (-7%) waned after releasing a strong result which included forecasts of increased investment in marketing, which may impede margin growth in the near term. Seven Group (-9%) posted a solid result and outlook, where an upgrade was perhaps expected. NZX (-3%) drifted lower notwithstanding a robust profit outcome.

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
HUB24 Australia Financials
Johns Lyng Group Ltd Australia Industrials
Lifestyle Communities Australia Real Estate
Mainfreight New Zealand Industrials
Pinnacle Investment Management Australia Financials
Uniti Wireless Ltd Australia Communication Services
Financials
AUB Group Australia
Real Estate
Charter Hall Group Australia
Consumer Discretionary
City Chic Collective Australia
Information Technology
Hansen Technologies Australia
Financials
HUB24 Australia
Industrials
Johns Lyng Group Ltd Australia
Real Estate
Lifestyle Communities Australia
Industrials
Mainfreight New Zealand
Financials
Pinnacle Investment Management Australia
Communication Services
Uniti Wireless Ltd Australia

PROFILE

FEATURES

  • APIR CODE PER0270AU
  • REDEMPTION PRICEA$ 3.0249
  • FEES * Management Fee: 1.3340%
    Performance Fee: 20.5% of the performance above the benchmark
  • FUM AT MONTH END A$ 900.26m
  • 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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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. 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.