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Global Small Companies Fund

Specialists in a vast and growing investable universe

October 2022 - Monthly REPORT

Global equity markets strengthen

SUMMARY

  • Global equity markets strengthened in October upon signs that inflation was starting to slow, which may allow central banks to ease the pace of interest rate increases
  • The Fund continues to invest in companies with strong management teams and the ability to deliver sustainable earnings growth
  • The Fund returned 5.2% in October, while the MSCI All Country World SMID Index returned 7.2% in Australian dollars

 

We recently held a Portfolio and Investment Update webinar, along with Q&A for shareholders, which is available below for your review. CPD points are applicable for Australian Financial Planners HERE. 

PORTFOLIO

Top Holdings (alphabetically)

Concentrix Corp
United States
Information Technology
Concentrix Corporation provides technology infused solutions. The Company offers digital customer experience (CX) solutions. Concentrix serves customers in the United States.
Irish Continental Group PLC
Ireland
Industrials
Irish Continental Group, Public Limited Company markets holiday packages and provides passenger transport, roll-on and roll-off freight transport, and container lift-on and lift-off freight services between Ireland, the United Kingdom, and Continental Europe.
Orion Engineered Carbons
United States
Materials
Orion Engineered Carbons S.A. is a global supplier of Carbon Black. The company offers products for coatings, printing inks, polymers, rubber and other applications.
PRA Group
United States
Financials
PRA Group, Inc. provides outsourced receivables management. The Company purchases, collects, and manages portfolios of defaulted consumer receivables.
Sendas Distribuidora SA
Brazil
Consumer Staples
Sendas Distribuidora S/A distributes consumer goods. The Company provides a wide variety of foods, household products, clothes, and toiletries. Sendas Distribuidora serves customers in Brazil.

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Oct 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 5.2% -19.7% 1.3% 2.4% 2.7% 5.6%
MSCI All Country World SMID Cap Index unhedged in AUD 7.2% -8.7% 10.2% 6.2% 7.2% 7.5%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Global equity markets bounced back in October, after weakening since the start of the year. The Fund returned 5.2% during the month, while the MSCI All Country World SMID Index returned 7.2% in Australian dollars.

Signs that inflation may be starting to slow brought expectations that the pace of interest rate rises would ease, before peaking at a lower level than had been forecast earlier. US economic data continues to weaken, although it appears more robust than the other major economies. Consumer sentiment is still weak despite a tight labour market. The US dollar appears to have stabilised following an extended period of strong appreciation against other major currencies.

The European Central Bank (ECB) raised its benchmark interest rate by 0.75% to 2.00% at its second consecutive meeting in order to control inflation which has reached a 40-year high. The UK equity, bond and currency markets all responded positively to the new Prime Minister Rishi Sunak’s more restrained fiscal policy. In China, President Xi Jinping consolidated political and economic power after securing a third term in office, but offered little sign of an early easing of the zero-Covid policy.

Equity returns varied significantly by region, US smaller companies strongly outperformed non-US shares, while emerging market stocks continued to fall in value. The Fund’s underweighting of the highly valued US market detracted from the Fund’s relative performance in October.

The Fund established a position in Melrose, a UK-based investment holding company, during October. It has a unique strategy of acquiring, improving and then divesting high quality but underperforming industrial businesses. The Melrose management team was established in 2003; it currently owns and focusses its efforts on the GKN group of businesses.

The company has delivered an impressive 21% average annual compound return to shareholders. However, plans announced in September to demerge and list the automotive division led to share price underperformance. The Fund took the opportunity to invest in a market-leading industrial auto and aerospace business, with a world-class management team at a deep discount to the underlying value of the business.

The Fund also invested in Nexi, a leading European payments business, which has a strong position in Italy, the Nordic region and other parts of Europe. The shares significantly underperformed the market, having completed acquisitions just before the global share market began to weaken.

The business is expected to deliver strong secular growth from growing electronic payments in its core geographical areas. The Fund invested in the company, paying a multiple of 15 times its earnings, gaining an interest in a sustainably growing business with significant room to also expand margins.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
13.3%
NUMBER OF STOCKS
38
BETA4
0.74
MAXIMUM DRAW DOWN
-29.1%

FEATURES

  • APIR CODE PCL0022AU
  • REDEMPTION PRICEA$ 1.3028
  • FEES * Management Fee: 1.1%
    Performance Fee: 20.5%
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 138.66m
  • 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. 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.