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Global Small Companies Fund

Specialists in a vast and growing investable universe

November 2021 - Monthly REPORT

Global equity markets retreat in response to the spread of Omicron

SUMMARY

The Fund returned -3.0% in November, underperforming the benchmark return of +1.7%.

We have also included a recording of our recent investor webinar below.

PORTFOLIO

Top Holdings (alphabetically)

Deliveroo PLC United Kingdom Consumer Discretionary
Nagarro SE Germany Information Technology
Orion Engineered Carbons United States Materials
PRA Group United States Financials
Softchoice Corp Canada Information Technology
Consumer Discretionary
Deliveroo PLC United Kingdom
Information Technology
Nagarro SE Germany
Materials
Orion Engineered Carbons United States
Financials
PRA Group United States
Information Technology
Softchoice Corp Canada

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 30 Nov 20211
1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. 5 YEARS P.A. SINCE INCEPTION P.A.
Global Small Companies Fund -3.0% 15.4% 11.0% 13.1% 11.1% 9.4%
MSCI All Country World SMID Cap Index unhedged in AUD 1.7% 23.7% 12.9% 15.5% 13.0% 10.4%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The Fund returned -3.0% in November, underperforming the benchmark return of +1.7%.

Global equity markets retreated in November as investor concerns centered around the spread of the new COVID-19 variant, Omicron. Markets continued to sell off during the month due to U.S. Fed tapering concerns, mounting inflationary pressure, continued labour shortages, and further supply chain disruptions due to news of restrictive measures in Europe to contain the spread of Omicron. Volatility surged with the uncertainty over the severity and transmissibility of Omicron and the effectiveness of existing vaccines against the variant. Markets remained highly volatile towards month-end and moved in line with news flow on the variant, with the VIX volatility index rising significantly.

U.S. equities provided the strongest monthly performance of the major developed equity markets, declining 1% as measured by the MSCI USA index. President Biden signed a long-awaited $550 billion infrastructure bill to upgrade America’s roads, bridges, and railways and deploy electric vehicle charging stations across the country. Defensive sectors outperformed cyclical sectors and growth outperformed value by a large margin. This rotation led to U.S. equities outperforming non-U.S. indices. The U.S. dollar also rallied on higher interest rates.

In Europe, several countries re-instituted restrictive measures due to rising cases of COVID-19. The discovery of the Omicron variant added to investor concerns that additional restrictive measures may be needed, potentially damaging business activity. Sectors that are sensitive to economic reopening and recovery fell on fears the new variant could result in lower demand. This notion sent the markets down over 5% on the month as measured by the MSCI Europe index. In Asia, equities also declined in November amid a broad market sell-off following the emergence of Omicron. Share prices in Thailand, South Korea, and Malaysia recorded significant declines. Chinese stocks fell nearly 6%, as measured by the MSCI China index, despite increased manufacturing activity driven by strong demand from Europe. Japan’s market held up better as the government announced a large stimulus package to boost growth.

Individual stock selection, currency, and the Fund’s underweight to North America were the main drivers of negative performance versus the benchmark in November. Despite the volatility during the month, only 91 bps separated the top contributor and largest detractor. As of 30th November, the top 10 holdings accounted for approximately 30% of the Fund’s assets, with the largest position approximately 4.3% of the portfolio. Regional and sector exposure remained relatively unchanged month over month.

Average cash holdings were lower month over month as the Fund added three new positions in November:

  • We re-initiated a position in Kambi, a software-driven sportsbook provider. The Fund originally purchased the stock in early 2020 and exited the position early this year. The stock had performed well due to positive sentiment on partnership contracts with DraftKings and Penn National. However, we were concerned about the risks related to these contracts and decided to exit the position. Since that time, the risks materialized, and the stock declined dramatically. We have now re-initiated the position as we believe that Kambi has adequately addressed those risks, the valuation of the company is reasonable, and the company is poised for growth.
  • The Fund initiated a position in Salmar, a Norwegian fish farm company and one of the world’s largest producers of farmed salmon. The company’s main activities include marine-phase farming, broodfish and smolt production, processing, and sale of farmed salmon. The company has been able to compound steadily over time driven by global demand for their product. Salmar has a fantastic operational record and operates in some of the world’s most favourable salmon farming climates.
  • Finally, the Fund added TietoEvry, a Finnish IT software, and service company providing IT and product engineering services, with approximately 24,000 employees, active in around 20 countries. The company generates significant free cash flow and should grow modestly over time.

The Fund exited three positions during the month including Brenntag. It was a successful investment for the Fund but reached our valuation target. Cerved, an Italian credit bureau, was sold as it is being taken private by an outside group. Lastly, the Fund exited Adritz, an Austrian industrial conglomerate, as we believe the Fund has better investment opportunities elsewhere.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
12.7%
NUMBER OF STOCKS
51
BETA4
0.75
MAXIMUM DRAW DOWN
-20.7%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.6728
  • FEES * Management Fee: 1.334%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 191.88m
  • STRATEGY INCEPTION DATE 1 April 2015
  • BenchmarkMSCI All Country World SMID Cap Index unhedged in AUD

Fund Managers

Jon Moog

CIO and Portfolio Manager

David Li

Head of Research and Portfolio Manager

Description

The Fund invests principally in small and midcap listed (or soon to be listed) global equities. Its investment objective is to obtain returns greater than the MSCI All Country World Index SMID Cap unhedged in Australian dollars (‘Index’) over rolling 3 year periods after fees. The Fund’s investment manager, Lizard Investors LLC, uses a value oriented investment approach that seeks to identify and invest in quality businesses that create significant value but are mispriced, overlooked, or out-of-favour. The investment manager believes that unique opportunities exist due to limited available research, corporate actions, or unfavourable investor perception.

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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 1st April 2015.
3. Annualised standard deviation since inception.
4. Relative to MSCI All Country World SMID Cap index unhedged in AUD.
* For further information regarding fees please see the PDS available on our website.