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Harding Loevner International Fund

An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.

June 2021 - Monthly REPORT

Ushering in a new era of drug development

SUMMARY

The Fund returned a pleasing 7.1% for its first month under the new investment team at Harding Loevner, compared to the benchmark’s return of 4.5%.

We are also pleased to advise that after extensive research and analysis the Fund has been awarded a ‘Superior’ rating by independent research house SQM Research. The full report is available HERE.

PORTFOLIO

Top Holdings (alphabetically)

Alphabet Inc United States Communication Services
Amazon United States Consumer Discretionary
Deere & Co United States Industrials
Facebook Inc United States Communication Services
First Republic Bank/CA United States Financials
Illumina United States Health Care
Microsoft United States Information Technology
Nike Inc United States Consumer Discretionary
PayPal United States Information Technology
SVB Financial Group United States Financials
Communication Services
Alphabet Inc United States
Consumer Discretionary
Amazon United States
Industrials
Deere & Co United States
Communication Services
Facebook Inc United States
Financials
First Republic Bank/CA United States
Health Care
Illumina United States
Information Technology
Microsoft United States
Consumer Discretionary
Nike Inc United States
Information Technology
PayPal United States
Financials
SVB Financial Group United States

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 30 Jun 20216

Pengana Harding Loevner International Fund Class B

The Class was established in 1 July 2015. From June 2021 Harding Loevner was appointed as the investment manager for the Fund.

1M
Since
Harding Loevner
Appointed June 20211
1Y 3Y 5Y
Since Fund
Inception
July 20152
Since Strategy
Inception
November 19893
Fund (APIR PCL0026AU)1,2

Managed by Harding Loevner from June 2021
7.1% 7.1% 25.2% 16.4% 15.7% 13.2%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
28.0% 17.1% 18.2% 15.5% 10.1%
Index5 4.5% 4.5% 27.7% 14.0% 14.4% 11.8% 7.2%

 

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

In recent decades, thanks to a deeper understanding of underlying biological mechanisms, drug development has progressed in leaps and bounds as research into new compounds has evolved beyond a trial-and-error approach. Whereas traditional methods screened large numbers of compounds in a scattershot search for desirable therapeutic effects, researchers now look for compounds that only bind with previously identified targets associated with specific disease vectors. Vertex has been a trailblazer of this new approach and its generalized adoption in conjunction with a reduction in the cost of gene sequencing at companies like Illumina is ushering in a new era, in which many of the treatments we receive will increasingly be more precise, personalized, and effective than they are today.

To design drugs with the precise shapes required to bind to the intended biological targets at the right location, scientists need to determine the molecular structure of the targets. FEI, acquired by Thermo Fisher Scientific in 2016, is a pioneer in cryogenic electron microscopy (cryo-EM), an innovation in atomic resolution imaging that was recognized with the 2017 Nobel Prize in chemistry. Cryo-EM is simpler to use than older techniques and produces three-dimensional biochemical maps with far more detail which are vastly expanding the range of targets available for potential exploitation.

The types of drugs are also expanding, beyond traditional small molecule drugs to next-generation formats such as “biologic” drugs, in particular a sub-category called monoclonal antibodies (mAb). These mAbs, roughly 1,000x larger than small-molecule drugs, are too complex to be synthesized chemically and thus need to be produced biologically from specially engineered cells. Biologic drugs have great therapeutic and commercial potential in oncology and autoimmune diseases, areas with large patient populations with unmet needs. Of the top 30 global blockbuster drugs in 2020, over two-thirds were new biologics, including Herceptin and Avastin, oncology drugs manufactured by Roche and its Japanese partner, Chugai Pharmaceutical**.

Innovations in biologics have sparked a wave of drug discovery efforts across the biopharma industry, and we are invested in a handful of participants well-placed to deliver persistent and profitable growth. Genmab is a pioneer in new types of mAb which binds with not just one, but multiple therapeutical target sites. Abcam, based in the UK, produces and distributes high-quality research-grade antibodies that allow live cells to be analyzed at a molecular level. A significant drawback of biologics, however, is the demanding and highly complex manufacturing process with the attendant exacting regulatory scrutiny. Many smaller biopharma companies with promising drug candidates simply don’t have the capital or know-how to manufacturer large-molecule drugs themselves. As a result, small- and mid-sized biotech companies, and even some large ones, often outsource development and commercial production to contract development and manufacturing organizations (CDMOs), such as Lonza and WuXi Biologics, as well as Patheon, another Thermo Fisher subsidiary. Outsourcing speeds up the development process by leveraging manufacturing expertise and reduces the need for capital expenditure.

The strong growth in biologic drugs emerging from the development phase to full production is a boon to Danaher, a leading provider of highly specialized equipment for manufacturing them. Its bioprocessing business grew over 20% in Q1, a growth rate that excludes the additional boost to revenues emanating from vaccine-related demand. Spirax-Sarco, a British industrial company, is another enabler of the biologics industry; its Watson-Marlow unit is a leading maker of peristaltic pumps, a critical component of bioprocessing. We see companies like these as the “shovel makers” in a gold rush across the life sciences that, after years of hype, is finally approaching what could be some deep veins.

Healthcare remains our largest overweight and an area where we have recently added.

[**] Morgan Stanley Equity Research

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
9.4%
NUMBER OF STOCKS
74
BETA9
0.76

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.9897
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 35.66m
  • STRATEGY INCEPTION DATE 1 December 1989
  • BenchmarkMSCI All Country World Total Return Index (net) in $A

Fund Managers

Peter Baughan

Portfolio Manager

Jingyi Li

Portfolio Manager

Description

An International Fund targeting superior risk-adjusted returns through investing in high-quality and durable growing companies at reasonable prices.

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.

EXPLORE OUR FUNDS

Harding Loevner International Fund
Harding Loevner International Fund
Axiom International Ethical Fund
Axiom International Ethical Fund
Axiom International Ethical Fund (Hedged)
Axiom International Ethical Fund (Hedged)
Australian Equities Fund
Australian Equities Fund
High Conviction Property Securities Fund
High Conviction Property Securities Fund
Global Small Companies Fund
Global Small Companies Fund
WHEB Sustainable Impact Fund
WHEB Sustainable Impact Fund
Emerging Companies Fund
Emerging Companies Fund
High Conviction Equities Fund
High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA)
Pengana International Equities Limited (ASX: PIA)
Private Equity Trust (ASX: PE1)
Private Equity Trust (ASX: PE1)
Alpha Israel Fund
Alpha Israel Fund

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. 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.