Market Review
The MSCI World All Countries Total Return Index AUD increased 1.5% during February.
Global equity markets declined in local currency terms over the month, following the strong gains which were delivered in the first few weeks of the new year.
The market falls followed growing investor concern that inflation was re-accelerating. This would require central banks to increase interest rates further than previously expected and to keep them elevated for longer.
Emerging Markets was the worst performing region, dragged down by China. Despite positive data showing a rebound in manufacturing activity, sluggish demand from Western markets continues to weigh on China’s exports.
European share markets received some support from better-than expected economic growth as energy prices continued to fall. While all sectors fell, information technology performed relatively well. Semiconductor stocks delivered positive returns as the increasing popularity of the artificial intelligence (AI) chatbot ChatGPT raised expectations that this would boost long-term demand.
Portfolio Comment
Global growth stocks outperformed value stocks by 1.1% in Australian dollar terms during February. This reflected investor concerns that more cyclical companies could see earnings come under pressure as the economy slows.
The Fund’s underperformance in February mainly reflected stock weakness in the financials (First Republic Bank), health care (Vertex Pharmaceuticals) and real estate (Country Garden Services Holdings) sectors. The overweight position in health care and underweight position in Apple also detracted from relative returns.
The Fund’s high-performing stocks in communications services (Meta Platforms), overweight position in industrials and underweight position in materials contributed to relative returns.
The Global Equity strategy has held a long-standing overweight position in health care. The Fund has identified a diverse range of high-quality, durable-growth businesses in the sector. These often operate in niche industries such as eye care, where industry growth is partly driven by an aging population.
Alcon is a market leader in both ophthalmic surgery solutions and contact lenses. It should benefit from higher numbers of cataract surgery procedures and increasing adoption of contact lenses worldwide. The company has invested heavily in innovation since it was de-merged from Novartis in 2019. It is now experiencing strong demand growth for its advanced intraocular lens products PanOptix and Vivity, as well as its re-engineered PRECISION1 contact lens for customers with dry eyes.
Financial stocks detracted from relative portfolio performance during February. First Republic Bank underperformed the market when net interest income growth disappointed investors and growth in interest-free deposits declined.
Vertex Pharmaceuticals underperformed the market after it reported a projected increase in 2023 operating expenses due to increased spending on research and development. Nonetheless, it delivered year-on-year revenue growth during the fourth quarter.
Meta Platforms, which owns Facebook, Instagram and WhatsApp reported resilient user engagement levels. It announced better-than-expected earnings, following material cost-cutting measures.
Portfolio Manager
Portfolio Manager
Portfolio Manager
An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.
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The Pengana Harding Loevner International Fund invests in high-quality, growing companies identified through fundamental research with a long-term, global perspective.
Pengana has appointed Harding Loevner to managed the Fund. Harding Loevner is a New Jersey-based global equity fund manager formed in 1989 with over US$86billion in Assets under Management.
Harding Loevner’ analysts search the world for companies that meet their high quality and durable growth criteria, conduct fundamental research, then value and rate their stocks to make them available to PMs for investment.
1. Harding Loevner was appointed fund manager as of 10 May 2021. June 2021 represents the first full month of Harding Loevner managing the Fund.
2. Class B Inception date 1 July 2015. Figures shown are calculated from the continuous performance of both the current and previous strategies. For performance see row labelled Fund (APIR PCL0026AU) in the table above which is the continuous performance of both the current and previous (shaded) strategies.
3. Harding Loevner Global Equity Strategy inception 1 Dec 1989
4. Prior to June 2021, the Harding Loevner Global Equity Strategy performance (labelled ‘Current Strategy (Partial Simulation)’ and shown in the shaded area) includes the strategy performance simulated by Pengana from the monthly gross returns of the Harding Loevner Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of Class B. From June 2021 the strategy performance is the performance of the Pengana Harding Loevner International Fund Class B.
5. MSCI All Country World Total Return Index in AUD.
6. Performance for periods greater than 12 months are annualised. 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.
7. The Harding Loevner Global Equity Strategy performance (shown in the shaded area in the chart, and in the performance table as row labeled ‘Harding Loevner Global Equity Strategy) has been simulated by Pengana from the monthly gross returns of the Harding Loevner Global Equity strategy. This simulation was done by: 1) the conversion of US-denominated gross returns to AUD, 2) applying the fee structure of the stated class. Strategy Inception 30 November 1989.
8. Annualised standard deviation since inception.
9. Relative to MSCI All Country World Total Return Index in AUD
* For further information regarding fees please see the PDS available on our website.
