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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.

December 2022 - Monthly REPORT

December Report

SUMMARY

  • Global share markets fell in December upon central bank comments which suggested global interest rates have further to rise and will remain elevated throughout 2023
  • Chinese stocks continued to rebound as the zero-Covid policy was abruptly unwound, raising hopes this will support the global economic recovery
  • The Fund returned -5.5% in December, while the benchmark returned -5.1%

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.
AMETEK Inc
United States
Industrials
AMETEK, Inc. is a global manufacturer of electronic instruments and electromechanical devices. The Company manufactures advanced instruments for process, aerospace, power, and industrial markets and is a supplier of electrical interconnects, specialty metals, technical motors and systems, and floor care and specialty motors.
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.
HDFC Bank Ltd
United States
Financials
HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.
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.
Synopsys Inc
United States
Information Technology
Synopsys, Inc. supplies electronic design automation solutions to the global electronics market. The Company provides design technologies to creators of advanced integrated circuits, electronic systems, and systems on a chip. Synopsys also provides consulting services and support to its customers to streamline the overall design process and accelerate time to market.
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 Dec 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
-5.5% -25.1% -9.6% 2.0% 5.7% 7.1%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
2.7% 6.8% 8.8% 8.8%
Index5 -5.1% -12.5% -0.2% 5.3% 8.3% 8.6% 6.7%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

Market Review 

The MSCI World All Countries Total Return Index AUD fell 5.1% during December.

Investor sentiment weakened when the US Federal Reserve (Fed) increased interest rates by 0.50% to a new target range of 4.25% – 4.50%. While this was expected, the Fed also indicated that it now expects rates to reach a peak above 5.0%. This reflects the strong US labour market, with unemployment at a historic low level of just 3.7% putting upward pressure on wages. The Fed continued to suggest interest rates would remain high throughout 2023, not starting to fall back until next year.

The European Central Bank and the Bank of England also increased interest rates by 0.50% in December. The Bank of Japan signalled a potential end to its ultra-accommodative monetary policy, which sent the yen soaring.

Shares in China and Hong Kong enjoyed a relief rally after the government rolled back the country’s zero-COVID policy, following unusual but widespread protests. This is expected to support global growth in the medium-term, despite rising infection numbers.

Portfolio Comment

During December, global value stocks outperformed growth by 3.2% in Australian dollar terms, as global central bank monetary policy remained restrictive. All market sectors except energy posted negative returns in December.

The Fund benefitted from positive stock selection in financials, overweight positions in healthcare and industrials, and the underweight position in consumer discretionary. However, negative stock selection in healthcare and consumer staples, the overweight position in information technology, and the underweight position in consumer staples detracted from relative returns.

The Fund recently established a position in the high-quality, durable growth consumer staples company Costco Wholesale, which is a US retail warehouse operator. Its business model benefits from membership fees and bulk sales, offering members low prices on a limited selection of both brand name and store-labelled products.

This model has proven to be resilient, offering the lowest unit prices in the US retail market, which has brought strong customer loyalty and low operating costs. The company is already a well-run business with strong profitability, but its future growth will be helped by its expansion into international markets such as Mexico and China.

US biopharmaceutical company Vertex Pharmaceuticals underperformed the market in December, when investors realised gains following strong year-to-date performance.

US-based fixed income trading platform Tradeweb, which is in the financials sector, contributed to relative returns when the company announced a partnership with BlackRock to enhance electronic bond trading.

Weak stock selection in the Eurozone detracted from relative performance in December. This included the French luxury goods conglomerate Kering, which faced slowing sales momentum in China, and whose Balenciaga brand was marred by controversies.

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
11.2%
NUMBER OF STOCKS
66
BETA9
0.87

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.7579
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 42.11m
  • 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. 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.