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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.

July 2021 - Monthly REPORT

Portfolio Spotlight: US Banks

SUMMARY

The Fund returned 2.9% for the month, compared to the Index return of 2.8%.

In this month’s report we provide a quick market review, and then a spotlight on the US banks.

We are pleased to announce that two Australian research houses have now completed their reviews of the Fund since the appointment of the new investment team and the Fund has received a Recommended ratings from Zenith as well as a Superior rating from SQM. The reports are available to AFSL holders 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
United States
Financials
Illumina
United States
Health Care
Microsoft
United States
Information Technology
Nike Inc
United States
Consumer Discretionary
SVB Financial Group
United States
Financials
Wuxi Biologics Cayman Inc
China
Health Care

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 30 Jul 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
2.9% 10.2% 26.3% 17.0% 15.9% 13.5%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
28.0% 17.4% 18.4% 15.8% 10.1%
Index5 2.8% 7.4% 29.9% 14.1% 14.6% 12.1% 7.3%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

Market Review
Markets posted modest gains in July, recovering from a mid-month swoon over concerns about the rapid spread of the more contagious Delta variant of COVID-19. After an initial bipartisan agreement, US Congress efforts to pass a large infrastructure bill appeared to stall after the Biden administration endorsed an ambitious plan to pass another, larger spending bill via a method that would circumvent the traditional legislative process, rendering earlier concessions moot. Both developments diminished prospects for an extended period of economic growth as the world tries to recover from the pandemic.

Information Technology and Health Care led, perhaps in anticipation of a new normal in which many people could be receiving booster shots and continuing to work via remote platforms indefinitely even as they move on with other parts of their lives, including in-store shopping. Consistent with that, shares of e-commerce companies, among the biggest winners during the peak stay-at-home period, declined. Regulators’ crackdowns on online education and other tech-related industries sank China’s stocks nearly 14%, leaving investors to speculate which sectors would be next.

Portfolio Spotlight: US Banks
The portfolio’s two US banks, First Republic and SVB Financial, have powered through times that have challenged other banks. Both are differentiated by the deep client relationships they have developed in their niche markets over time. Net promoter scores (NPS) measure the likelihood a company’s customers would recommend its offerings; the high-net-worth-focused First Republic has NPS higher than Apple’s. Silicon Valley-based SVB doesn’t release its NPS but has 50% share of venture-backed tech and life science banking in the US. Both banks’ high-touch customer service allows them to grow through referrals and cross-selling irrespective of the rate environment. The approach also makes customers less likely to switch to other banks, insulating the pair from competition from larger rivals or fintech players.

July Attribution
• In the US, Alphabet reported stronger-than-anticipated advertising growth, driven in part by the recovery in travel, a top category for search and display ads. Align Technology raised its guidance for the year due to increased demand for its clear trays over more-in-office-intensive orthodontics.
• In the Netherlands, semiconductor equipment maker ASML reported strong order growth as its chip manufacturing customers race to increase capacity to meet robust end-market demand.
• Nearly all our holdings in China declined after the government announced sweeping regulatory changes. Property management company Country Garden Services, biologics manufacturer Wuxi Biologics, and online travel site Trip.com each declined sharply.

Year-to-Date Attribution
· Stocks in the US have contributed strongly to returns, particularly Alphabet and Illumina, the latter of which has benefitted from strong demand for its genetic sequencing equipment.
· Our US-based banks SVB Financial and First Republic Bank have also outperformed, with margins benefitting from the steepening yield curve and surprisingly low credit defaults, even for banks with such high-quality asset bases.
· Within Emerging Markets, Brazil’s COVID-19 struggles have weighed on Itau Unibanco and B3. Polish video game developer CD Projekt also detracted after its botched Cyberpunk 2077 launch.
· In Germany, remote connectivity software company Teamviewer declined on market concerns that growth will slow as more employees return to the office.

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
9.4%
NUMBER OF STOCKS
75
BETA9
0.76

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.9916
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 68.92m
  • 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.