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Global Small Companies Fund

Specialists in a vast and growing investable universe

March 2022 - Monthly REPORT

Shipping constraints abate

SUMMARY

The Fund was slightly positive, +0.14%, against the index which declined -2.26% in March 2022.

PORTFOLIO

Top Holdings (alphabetically)

Cogeco Communications
Canada
Communication Services
Sendas Distribuidora SA
Brazil
Consumer Staples
Serco Group PLC
United Kingdom
Industrials
Softchoice Corp
Canada
Information Technology
TietoEVRY Oyj
Finland
Information Technology

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Mar 20221
1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. 5 YEARS P.A. SINCE INCEPTION P.A.
Global Small Companies Fund 0.1% -5.4% 17.3% 7.9% 7.9% 7.6%
MSCI All Country World SMID Cap Index unhedged in AUD -2.3% 3.0% 19.6% 9.7% 10.0% 8.5%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

March was a volatile month as the major markets plummeted in the first ten days of the month only to see a broad-based recovery by the end. Thanks to strong employment data, the S&P 500 ended on a positive note despite growing inflationary concerns. The VIX Index itself was volatile peaking at 35 and ending the month at 20.

While supply chain issues are likely to linger well into next year, we are starting to see shipping constraints abate.  We see this as a positive development because it may offset some of the inflationary pressure facing the world, at least in the 2H of 2022. While the war in Ukraine continues to be a major concern, any type of resolution would further help put a stop to rising prices.  Longer-term we believe inflation is still the primary concern facing global markets.  The U.S. dollar, a safe-haven asset, is approximately 20% above the Purchase Price Parity (PPP) level. We see this as unsustainable and expect it to reverse when growth resumes, with the dollar typically acting countercyclically. Non-US stocks continue to trade at a meaningful discount to US stocks (14x PE vs. 18x PE).  While we expect volatility, less negative geopolitical news and supportive valuations should help stocks to hold the bottom they found in March.

The Fund had a good month in the Consumer Discretion and Information Technology sectors. Regionally, South and North America drove most of March outperformance. As of March 31, 2022, the top 10 positions account for 38.7% of the portfolio. Regional and sector exposure remained relatively unchanged month over month.  Adding Assai (Sendas Distribudora) and Softchoice during periods of weakness paid off in the first quarter as both stocks performed well. They were there two largest contributors to returns.

Despite all the market and geopolitical turmoil, it was a reasonably quite period for the Fund in terms of activity.  The Fund completed exiting 5 smaller positions which we had been reducing exposure to, as we continue to tighten up the portfolio.  One new position was added this month, MTY Foods in Canada.  MTY operates as a multi-brand franchisor of restaurants in Canada and America.  The business model is tremendously cash generative and largely protected against inflation.  Management has been able to add brands to their portfolio over time at very high returns on investment.  We like the significant recurring free cash flow associated with this business and the opportunity to redeploy the capital if opportunities present themselves.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
12.9%
NUMBER OF STOCKS
45
BETA4
0.75
MAXIMUM DRAW DOWN
-20.7%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.5339
  • FEES * Management Fee: 1.1%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 179.13m
  • 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.