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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 2023 - Monthly REPORT

Global share markets continued to perform strongly

SUMMARY

  • Global share markets continued to perform strongly during December as the world economy remained resilient and expectations grew that interest rates will start to fall in 2024 across most major developed economies.
  • Australian dollar strength detracted from returns.
  • The Fund returned 2.2% after fees and expenses in December, outperforming the benchmark which returned 1.8%.

PORTFOLIO

Top Holdings (alphabetically)

Accenture PLC
United States
Information Technology
Accenture PLC provides management and technology consulting services and solutions. The Company delivers a range of specialized capabilities and solutions to clients across all industries on a worldwide basis. Accenture operates a network of businesses provides consulting, technology, outsourcing, and alliances.
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.com Inc
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.
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 Corp
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.
Sony Group Corp
Japan
Consumer Discretionary
Sony Group Corporation manufactures and distributes electronics products and provides related solutions. The Company produces televisions, cameras, mobiles, audio and video products. game equipment, and more. Sony Group also engages in game production, movie production, music production, and other businesses.
Thermo Fisher Scientific Inc
United States
Health Care
Thermo Fisher Scientific, Inc. manufactures scientific instruments, consumables, and chemicals. The Company offers analytical instruments, laboratory equipment, software, services, consumables, reagents, chemicals, and supplies to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions, and government agencies.
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 20236

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 2Y
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
2.2% 21.3% -4.7% 1.3% 2.7% 9.4% 8.7%
Current Strategy (Partial Simulation)4

Harding Loevner Global Equity Strategy
3.4% 11.2% 10.2% 9.2%
Index5 1.8% 21.4% 3.1% 7.7% 10.2% 12.4% 10.1% 7.1%

Swipe horizontally to see all columns

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION7

COMMENTARY

Market Review 

Global equity market performance remained strong in local currency terms during December. Signs that inflation is continuing to ease gave rise to growing investor optimism that the major central banks will begin cutting interest rates in 2024. Expectations that the US Federal Reserve will begin to reduce interest rates ahead of other major central banks pushed the US dollar lower against many of its key trading partners’ currencies in December.

All sectors strengthened during December, except energy which was impacted by lower oil prices. All major markets delivered positive equity returns except China, where economic weakness reflecting cautious consumers and high debt levels impacted performance.

Inflation has fallen significantly across the major economies, lower bond yields are bringing down borrowing costs and implied volatility in the share markets is back down to pre-pandemic levels. This is an attractive environment for long-term investing in global equity markets.

Portfolio Comment

The Fund again outperformed the benchmark during December as higher quality stocks (those delivering higher returns with stronger balance sheets) continued to drive share market returns.

The Fund’s overweight position in industrials, underweight in energy, and strong relative stock performance in health care and communications services boosted relative returns. Weaker stock performance in financials and information technology were the main detractors from relative returns.

The Fund is focused on identifying great companies through bottom-up analysis and it continues to find exciting opportunities in health care, industrials, communications services, and Europe, in which it maintains overweight positions.

During the second half of 2023, the Fund built up a position in Germany’s leading online real estate portal Scout24, connecting buyers, renters, sellers, and landlords. The company has taken advantage of the ongoing digitalisation of the real estate market to expand its range of services, generating leads for real estate agents and mortgage lenders. Scout24 is developing an increasingly valuable brand that is expected to deliver sustainable revenue growth.

US-based biotechnology firm Vertex Pharmaceuticals outperformed after the company announced positive results from the phase 2 trial of VX-548. It is an experimental drug for the treatment of pain and numbness in legs and feet caused by nerve damage from diabetes. It has a similar effectiveness but a better safety record than the current market leader Lycra and is taken once daily (instead of three times). The patient population is two million in the US alone and represents a US$10 billion opportunity, which can extend to a further US$5 billion if a phase 2 trial for lower back pain is successful.

The holding in US-based semiconductor and infrastructure developer Broadcom contributed to relative returns in December. It announced strong revenue and earnings growth in 2023 upon increased AI-driven demand with stable core semiconductor revenues. The company also published improved guidance for 2024 as its recently acquired VMWare business and rising demand for ASIC (application-specific integrated circuits) chips drive revenue growth. While the stock has performed strongly it continues to generate strong cash flow and has attractive AI-related earnings potential.

US-based fixed income trading platform Tradeweb and derivatives exchange CME Group both detracted from relative returns during December. Some investors took profits following a period of outperformance upon elevated average daily trading volumes, fearing these may fall as interest rate volatility subsides. Tradeweb remains well positioned to benefit from the shift to electronic trading in fixed income markets. CME maintains scale and network advantages that deliver strong profitability and create a strong barrier to entry.

China biotechnology company WuXi AppTec detracted from relative returns after the company published a full-year profit warning. It cited slowing growth in the demand for vaccines and a pullback in funding by foreign investors (especially in the US) which negatively impacted China’s biotechnology sector. The stock remains a compelling investment with its contract research and manufacturing expected to grow earnings. It is well positioned for the growth in GLP-1 weight loss drugs across several products and is a key supplier for Eli Lilly’s diabetes drug Mounjaro which has now been approved for weight loss.

PROFILE

STATISTICAL DATA2

PORTFOLIO SUMMARY
VOLATILITY8
11%
NUMBER OF STOCKS
63
BETA9
0.89

FEATURES

  • APIR CODE PCL0026AU
  • REDEMPTION PRICEA$ 0.9222
  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $10,000
  • FUM AT MONTH END A$ 42.76m
  • 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.

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Global Small Companies Fund
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WHEB Sustainable Impact Fund
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Pengana International Equities Limited (ASX: PIA)
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Pengana Diversified Private Credit Fund
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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.