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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.

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August 2022 - Monthly REPORT

Monthly Update

SUMMARY

  • Global equity markets fell in August upon expectations of higher for longer interest rates and rising geo-political uncertainty
  • Energy was the only sector to deliver positive returns during August, reflecting Europe’s strong demand for non-Russian natural gas, while Health Care, and Information Technology underperformed; Emerging Markets were the strongest region, while Europe was the weakest
  • In August the Fund returned -3.2%, while the MSCI All Country World Total Return Index returned -2.0%.

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.
L'Oreal SA
France
Consumer Staples
L'Oreal manufactures cosmetics. The Company offers mascara, lip gloss, foundation, eyeshadow, primer, nail polish, lipstick, face powder, blusher, and concealer, as well as skin, hair, and body care products. L'Oreal serves customers worldwide.
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 Aug 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 1Y
Since
Harding Loevner
Appointed June 20211
 3Y 5Y
Since Fund
Inception
July 20152
Since Strategy
Inception
November 19893
Fund (APIR PCL0026AU)1,2

Managed by Harding Loevner from June 2021
 -3.2% -24.4% -11.1% 4.4% 7.4% 7.6%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
 5.7% 9.3% 9.5% 9.0%
Index5 -2.0% -10.3% -0.5% 7.4% 10.1% 9.0% 6.8%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

Market Review 

Global equity markets fell in August upon expectations of higher for longer interest rates and rising geo-political uncertainty.

A speech by US Federal Reserve Chair Jerome Powell reiterated its commitment to reducing inflation. This led investors to expect that interest rates have further to rise, dashing hopes of an early return to a more accommodative monetary policy.

In Europe, tensions with Russia, previously the region’s main supplier of natural gas, continued to rise. This led to speculation that gas consumption by large-scale energy-intensive users will be rationed over the northern winter. This could result in materially lower industrial production in countries such as Germany and possible power outages impacting households.

In Asia, US House Speaker Nancy Pelosi visited Taiwan. This prompted China to undertake extensive military exercises in the Taiwan Strait, effectively blockading the island for a few days. This renewed fears that any conflict in the region would disrupt the global semiconductor supply chain, in which Taiwan plays a key role.

Energy was the only sector to deliver positive returns during August, reflecting Europe’s strong demand for non-Russian natural gas. The most significant underperforming sectors were Health Care, and Information Technology which was impacted by semiconductor companies that reported slowing sales of PCs, laptops, and smartphones impacting demand.

On a regional basis, Emerging Market companies outperformed. Many Indian stocks performed strongly when Apple announced it would manufacture iPhones in the country, reflecting improvements in India’s manufacturing capabilities.

China stocks were little changed overall in August. The government faced escalating defaults in its highly leveraged property market and slower economic growth from continued COVID-related lockdowns.

Europe was the weakest performing equity market, due to persistently high inflation and concerns over energy supplies.

Portfolio Comment

One of the portfolio’s largest holdings is Vertex Pharmaceuticals, a company focused on developing and commercialising therapies for the treatment of cystic fibrosis.

Last year, Vertex was among the portfolio’s most significant detractors from relative performance. Revenue growth had slowed from the company’s unsustainably high 2020 pandemic-related levels. These were driven by consumers seeking to ensure access to the company’s lifesaving solutions throughout lockdowns.

The company retains its competitive advantage, consistently developing effective treatments, while other companies have struggled to deliver competitive products.

The company’s pipeline of new drugs appears promising, including a sickle cell anaemia treatment that is undergoing phase three trials. This has helped the company strongly outperform the market this year.

Social media group Pinterest reported strong earnings, having stabilised user growth and increased its share of advertising spending. The company recently hired Bill Ready, a former executive at Google and PayPal, as CEO, raising hopes of management improvement.

Good stock selection within US companies contributed to the portfolio’s relative performance. Advertising technology company The Trade Desk outperformed after its earnings exceeded market expectations due to strong demand for advertising viewed on internet-enabled televisions.

Eyecare specialist Alcon underperformed, when despite reporting good earnings growth it lowered future guidance to reflect the adverse impact of currency movements.

 

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
11%
NUMBER OF STOCKS
66
BETA9
0.85

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.7668
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 45.81m
  • 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

Rick Schmidt

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 Fund
Axiom International Fund
Axiom International Fund (Hedged)
Axiom International 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
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund
CONTACT INVESTOR SERVICES
INVEST NOW

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.