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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.

May 2022 - Monthly REPORT

Monthly Report - May

SUMMARY

  • Relatively flat returns in May belied the volatility during the month
  • The style-headwinds experienced by high-quality, fast-growing companies continued unabated through May
  • Amid strong style-headwinds and economic uncertainty, we continue to find opportunities to add to our ownership of high-quality, growing businesses whose current share prices fail to reflect their underlying value.

 

We recently held a Portfolio and Investment Update webinar. Financial planners may complete a short questionnaire available HERE for CPD points.

PORTFOLIO

Top Holdings (alphabetically)

Alphabet Inc
United States
Communication Services
Alphabet Inc. operates as a holding company. The Company, through its subsidiaries, provides web-based search, advertisements, maps, software applications, mobile operating systems, consumer content, enterprise solutions, commerce, and hardware products.
Amazon
United States
Consumer Discretionary
Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company products include books, music, computers, electronics and numerous other products. Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers. Amazon also operates a cloud platform offering services globally.
Deere & Co
United States
Industrials
Deere & Company manufactures and distributes a range of agricultural, construction, forestry, and commercial and consumer equipment. The Company supplies replacement parts for its own products and for those of other manufacturers. Deere also provides product and parts financing services. Deere and Company extends its services and products worldwide.
First Republic Bank
United States
Financials
First Republic Bank and its subsidiaries provide private banking, private business banking and private wealth management in urban, coastal markets in the U.S. First Republic delivers relationship-based service by providing a single point of contact for all of its services.
Meta Platforms Inc
United States
Communication Services
Meta Platforms, Inc. operates as a social technology company. The Company builds applications and technologies that help people connect, find communities, and grow businesses. Meta Platform is also involved in advertisements, augmented, and virtual reality.
Microsoft
United States
Information Technology
Microsoft Corporation develops, manufactures, licenses, sells, and supports software products. The Company offers operating system software, server application software, business and consumer applications software, software development tools, and Internet and intranet software. Microsoft also develops video game consoles and digital music entertainment devices.
Schneider Electric SE
France
Industrials
Schneider Electric SE manufactures electrical power products. The Company offers car chargers, home security goods, light switches, access control, sensors, valves, circuit breakers, cables, accessories, signaling devices, fuse, motor starters, and voltage transformers. Schneider Electric serves customers worldwide.
SVB Financial Group
United States
Financials
SVB Financial Group is the holding company for Silicon Valley Bank. The Bank is a commercial bank that serves emerging growth and middle-market growth companies in targeted niches, focusing on the technology and life sciences industries. Silicon Valley operates offices throughout the Silicon Valley and other areas of California, as well as in other states.
UnitedHealth Group Inc
United States
Health Care
UnitedHealth Group Incorporated owns and manages organized health systems. The Company provides employers products and resources to plan and administer employee benefit programs. UnitedHealth serves customers in the United States.
Vertex Pharmaceuticals Inc
United States
Health Care
Vertex Pharmaceuticals Incorporated discovers, develops, and commercializes pharmaceutical products. The Company develops drugs for the treatment of cystic fibrosis, cancer, inflammatory bowel, autoimmune disease, and neurological disorders. Vertex Pharmaceuticals serves healthcare sector worldwide.

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 31 May 20226

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
-4.1% -13.7% -13.7% 7.0% 6.9% 7.9%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
8.1% 8.6% 9.8% 9.1%
Index5 -0.8% 0.6% 0.6% 10.4% 9.8% 9.5% 6.9%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

Market Review
Relatively flat returns in May belied the volatility during the month as investors wrestled with the implications of sustained inflation and the inevitable response by central bankers, including the US Federal Reserve increasing rates by 50 basis points. US retailers Target and Wal-Mart spooked markets with warnings of weaker consumer spending, fuelling speculation about a looming recession. In China, the extent to which the country’s Zero-COVID policy and extensive lockdowns have hurt the economy became more apparent, although government reopening efforts and planned stimulus led to optimism toward the end of the month.

Attribution
The style headwinds experienced by high-quality, fast-growing companies continued unabated through May. On a year-to-date basis, value companies (represented by the least expensive quintile) have outperformed the most expensive quintile by over 2,800 bps. The severity of these style headwinds has contributed to portfolio underperformance across all major sectors and regions.

Significant stock declines during May from:

  • Rockwell Automation which reported disappointing earnings due to supply chain constraints that prevented fulfillment if its growing order book; and
  • Illumina in the health care sector which experienced a sharp decline in share price after a Delaware jury ordered the company to pay more than $333 million in damages after ruling that the company’s DNA-sequencing systems infringed upon two patents of Chinese genomics rival BGI.
  • The portfolio’s underweight in Consumer Staples contributed to relative returns as worries about consumer spending weighed on the sector.


Portfolio Comment

Amid strong style headwinds and economic uncertainty, we continue to find opportunities to add to our ownership of high-quality, growing businesses whose share prices fail to reflect their underlying value. One is Schneider Electric, a French electrical component specialist. Schneider helps its industrial and other commercial customers capture real-time data, with a focus on measuring and evaluating electricity consumption to identify and implement energy efficiencies to save money and lower carbon emissions. While Schneider is not immune to economic cycles, we expect rising energy prices and demand for energy efficiency projects will lead to sustained growth over the long run. We’ve added to our holding in the company several times this year, most recently in May.

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
10.7%
NUMBER OF STOCKS
68
BETA9
0.83

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.7783
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 47.11m
  • 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.