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Emerging Companies Fund

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

December 2022 - Monthly REPORT

December report

SUMMARY

The Fund fell 2.0% in December, outperforming the Small Industrials by 1.4% and outperforming the Small Ordinaries by 1.8%. For the 12 months to December, the Fund was down 21.4%, outperforming the Small Industrials Index by 0.4% and underperforming the Small Ordinaries Index by 3.0%.

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Dec 20221
1 MTH 1 YEAR 3 YEARS P.A. 5 YEARS P.A. 10 YEARS P.A. 15 YEARS P.A. SINCE INCEPTION P.A.
Emerging Companies Fund -2.0% -21.4% 4.8% 5.3% 11.0% 7.0% 11.9%
S&P/ASX Small Ordinaries Index -3.7% -18.4% 1.4% 2.9% 5.1% 0.9% 4.5%
Outperformance 1.8% -3.0% 3.4% 2.4% 5.8% 6.1% 7.4%
ASA Small Cap Industrials Index** -3.4% -21.8% -2.0% 1.9% 6.6% 2.4% 4.8%
Outperformance 1.4% 0.4% 6.8% 3.4% 4.4% 4.7% 7.1%

Swipe horizontally to see all columns

COMMENTARY

Global markets were weak in December, with the US index falling 5.9% and NASDAQ down 8.7% after a very strong rally in October and November. The optimism surrounding China’s reopening seemed to reverse as the reality of a spreading virus created uncertainty about how smoothly the economy might recover as workers are isolated with illness. Bond markets fell implying less optimism about the outlook for interest rates as short-term inflation data remains fluid.

The Australian market fell 3.2% with resources stocks outperforming and bond-sensitive sectors, such as technology and property, underperforming.

Our key positive contributors in December were:
EBOS (+8%) was particularly strong with no obvious catalyst in December, allowing us some profit taking. NIB Holdings (+6%) also bucked the overall market given its highly resilient earnings streams, and marginal exposure to a recovery in tourism via its travel insurance subsidiary. ALS Ltd (+1%) benefited from a 10% rally in the gold price over the past two months. G8 Education (+13%) provided an earnings update showing mild improvements in occupancy and price rises to recover cost inflation. Kelsian (+5%) rallied after winning a Sydney bus contract during the month.

Our key detractors in December were:
Charter Hall (-13%) and MA Financial (-8%) both underperformed due to their earnings exposure to asset markets, which came under pressure during the month. Carsales (-9%) fell in line with global tech stocks. Genex (-21%) retraced following the withdrawal of the conditional takeover offer by a consortium of private investors. City Chic (-40%), which is a very small position in the Fund, was further hit by sales weakness in the northern hemisphere.

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

PORTFOLIO

Top Holdings (alphabetically)

ALS Ltd
Australia
Industrials
ALS Limited is a commercial services company with national and international operations. The Company's services include analytical and testing services, producing industrial and commercial chemical products, and hospitality, cleaning, and catering products.
AUB Group
Australia
Financials
AUB Group Limited provides financial services. The Company offers equity-based risk management, insurance broking, and specialist underwriting agencies, as well as focuses on risk solutions for clients and strengthening our partners risk advisory capabilities.
Carsales Com LTD
Australia
Communication Services
carsales.com Ltd owns and operates a portfolio of automotive and related industry websites, including an automotive classifieds website.
Charter Hall Group
Australia
Real Estate
Charter Hall Group invests in and develops real estate. The Company manages real estate investment funds and develops commercial, residential, and industrial properties.
EQT HOLDINGS LTD
Australia
Financials
Equity Holdings Limited provides personal trust and financial services to customers in Australia. Services include will and estate planning, trustee for settlements, financial guardian, investment and property management and fund investments. Other services provided by the company include income tax services, short term share trading and mortgage loans and investments.
Hansen Technologies
Australia
Information Technology
Hansen Technologies Limited develops, supports and integrates billing systems software for the telecommunications and utilities sectors in Australia. The Company also provides IT outsourcing services such as facilities management and develops software and services for workforce management.
IVE Group
Australia
Communication Services
IVE Group Limited provides advertising and marketing services. The Company offers promotional merchandising, third party sourcing, printing, retail display, and business communication services. IVE Group conducts its business in Australia.
Lifestyle Communities
Australia
Real Estate
Lifestyle Communities Ltd Limited provides resort style housing for individuals in their fifties and older.
NIB Holdings
Australia
Financials
NIB Holdings Ltd. offers health insurance products. Depending on the specific product, the Company covers ambulance costs; and reimburses for costs not covered by Medicare including dental, optical, physiotherapy and natural therapies; and some hospitalization costs.
Seven Group Holdings
Australia
Industrials
Seven Group Holdings Ltd. is a diversified operating and investment group. The Groups interests include media holdings that include Seven Network, a commercial television network and publishing company, a telecommunications company, and a heavy equipment dealer that operates Caterpillar dealerships in Australia and North Eastern China.

PROFILE

FEATURES

  • APIR CODE PER0270AU
  • REDEMPTION PRICEA$ 2.1591
  • FEES * Management Fee: 1.3340%
    Performance Fee: 20.5% of the performance above the benchmark
  • FUM AT MONTH END A$ 688.26m
  • 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. 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.