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Global Small Companies Fund

Specialists in a vast and growing investable universe

July 2020 - Monthly REPORT

The new positions in our portfolio

SUMMARY

The Fund returned +2.58% in July, outperforming the benchmark return of 0.68%.

 

PORTFOLIO

Top Holdings (alphabetically)

Cerved Group Italy Financials Dino Polska Poland Consumer Staples Enghouse Systems Canada Information Technology NICE Information Service Korea, Republic Of Industrials Swedish Match AB Sweden Consumer Staples

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Jul 20201
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION
Fund 2.6%3.7%-0.3%4.9%7.0%
Benchmark 0.7%-3.7%1.0%6.8%6.1%
1 Month1 Year2 Years P.A.3 Years P.A.SINCE INCEPTION
Fund
2.6%
3.7%
-0.3%
4.9%
7.0%
Benchmark
0.7%
-3.7%
1.0%
6.8%
6.1%

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The Fund returned +2.58% in July, outperforming the benchmark return of 0.68%.

Global equities rallied in July despite rising concerns about COVID-19 infection rates, rising tensions between the US and China, and signs of a stalling global economic recovery.  Every major market finished in positive territory with the exception of Japan.

In the US, continued optimism surrounding the development of a COVID-19 vaccine and better-than-expected corporate financial reports propelled the equity markets.

In Europe, equity market results were mixed but generally trended upward.  The European Union reached a deal on a Euro750bn stimulus package to help with the economic impact of the COVID-19 breakout.

Asian markets and emerging markets were led by China and Korea.  China saw GDP growth in the second quarter and positive data suggesting a faster than expected economic recovery. Both countries appear to show, at least so far, that a recovery is possible without a vaccine if the virus can be brought under control with other measures.  Japan, by contrast, lagged all other Asian and developed markets.  A lack of a formal government stimulus and an increase in COVID-19 cases made investors skittish.

Emerging markets were the standout performers in the month, as low interest rates and a weak US dollar drove outperformance.  The MSCI Emerging Markets index rose by 9.0% while the MSCI Developed Markets index increased by 4.8%.

Individual stock selection and currency were the main drivers of the Fund’s outperformance in July. Increased volatility in the global equity markets was reflected in the Fund as approximately 148 bps separated the top contributor and largest detractor.  As of 31st July, the top 10 holdings accounted for approximately 38% of the Fund’s assets, with the largest position approximately 4.8% of the portfolio. Regional and sector exposure remained consistent month over month. The Fund has outpaced the benchmark 9 out of the past 10 months and 10 out of the last 14 months.  Over the past year, the Fund’s upside capture has been 141% while the downside capture has been 98% vs. the benchmark, generating approximately 9% of alpha.

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Cash holdings decreased to 4% as we added several new names to the portfolio and added to several existing positions.  We continue to build the new positions in the portfolio and will discuss them broadly. 

The first is a luxury outwear company based in North America.  The company’s premium products and attractive margins have created competitive advantage in a retail segment that lacks competitors.  The company has established a phenomenal omni-channel retail model that will help promote significant growth in underpenetrated regions such as China.

Another significant new addition to the portfolio is a payments and business services company based in China.  This company offers payment services to small merchants, leveraging QR code technology.  In addition, they offer merchant software as a service (SaaS) and fintech products as well as marketing and advertising services.  This company is rapidly becoming one of the largest players in the QR code payment space, and QR code payments are becoming the preferred method for mobile payments for both merchants and customers in China.

The Fund added to the position in Boohoo Group, a UK based on-line retailer, after the stock price dropped on the back of negative news surrounding one of its supply chain locations.  Based on our research and extensive knowledge of the company, we believe that the situation is contained and concerns surrounding their supply chain are unwarranted.  As a result, we capitalized on the opportunity to add to the existing position. Like many internet-enabled businesses, Boohoo has been a major beneficiary of the shift in retail from brick-and-mortar stores to online.  We have actively traded Boohoo over time, predominantly in response to valuation.

The Fund exited the position in Medley Inc., a recruitment and telemedicine platform company based in Japan.   While this is an excellent company, valuations have increased substantially, compelling the Fund to realize the gains in the position.

PROFILE

Platform Availability

  • AMP North
  • Asgard eWrap
  • AET Wholesale Access Fund
  • BT Panorama
  • BT Wrap
  • Colonial First Wrap
  • Centric IDPS
  • Centric Super
  • Hub24
  • IOOF Pursuit
  • IOOF Portfolio Service
  • IOOF Core
  • Macquarie Wrap
  • Mason Stevens
  • MLC Navigator
  • MLC Wrap
  • Netwealth
  • Omniport(lifespan)
  • Powerwrap
  • Praemium
  • uXchange

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
13.1%
NUMBER OF STOCKS
49
BETA4
0.76
MAXIMUM DRAW DOWN
-20.7%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.3908
  • FEES * Management Fee: 1.1%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 107.99m
  • STRATEGY INCEPTION DATE 1 April 2015
  • BenchmarkMSCI All Country World SMID Cap Index unhedged in AUD

Fund Managers

Jon Moog

CIO 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. 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 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.