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High Conviction Equities Fund

A concentrated portfolio of ethically screened global companies

October 2022 - Monthly REPORT

Telix delivers strong results

SUMMARY

The Fund rose 8.5% in the month of October, with market-wide optimism for a slowdown in interest rate hikes from the US Fed.

Notable performance was recorded by the Fund’s largest holding Telix, which rose 46% after reporting strong quarterly results for its lead product Illucix (prostate cancer diagnostic).

PORTFOLIO

Top Holdings (alphabetically)

Ciena Corp
United States
Information Technology
Ciena Corporation develops and markets communications network platforms, software, and offers professional services. The Company's broadband access, data and optical networking platforms, software tools, and global network services support worldwide telecom and cable/MSO services providers, and enterprise and government networks.
Eckert & Ziegler Strahlen- und
Germany
Health Care
Eckert & Ziegler AG manufactures equipment for the pharmaceutical industry. The Company produces low-level radiation sources used to treat cancer, heart and other diseases, and in equipment used to calibrate gamma cameras and positron emission computer tomographs. Eckert & Ziegler also develops cancer drugs. The Company markets its products worldwide.
Lumentum
United States
Information Technology
Lumentum Holdings Inc. operates as a holding company. The Company, through its subsidiaries, supplies optical and photonic products. Lumentum Holdings serves customers worldwide.
Opthea Ltd
Australia
Health Care
Opthea Limited operates as a biotechnology company. The Company develops therapies for diabetic macular edema, corneal neovascularization and transplantation, and dry eye disease. Opthea serves patients and healthcare providers in Australia.
Telix Pharmaceuticals Ltd
Australia
Health Care
Telix Pharmaceuticals Limited operates as a biotechnology company. The Company develops and commercializes molecularly-targeted radiation therapy for the treatment of prostate, renal, and brain cancer. Telix Pharmaceuticals serves patients worldwide.

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Oct 20221
1 MTH 1 YEAR 2 YEARS P.A. 3 YEARS P.A. 5 YEARS P.A. SINCE INCEPTION P.A.
High Conviction Equities Fund Class A 8.5% -21.8% 0.0% 1.9% 5.6% 21.7%
MSCI World Total Return Index (net, AUD) 7.8% -4.2% 12.1% 8.8% 10.3% 10.7%
RBA Cash Rate plus 3% 0.5% 3.8% 3.5% 3.4% 3.8% 4.2%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

Notable performance was recorded by the Fund’s largest holding Telix, which rose 46% after reporting strong quarterly results for its lead product Illucix (prostate cancer diagnostic). Given the product had only recently received reimbursement, we expect this trend of positive results to continue over coming quarters. The market also liked management’s discussion of revenue growing more rapidly than expenses in future, which should lead to profitably at some point in 2023. In early November, the company reported positive phase 3 results from its renal cancer diagnostic study Zircon. This creates a USD500mln (AUD780mln) market opportunity for the company. Given the positive data, the product will likely be approved by the FDA and launched in 2024. The company is now in a very strong position to invest in its pipeline of 9 other assets and begin generating profits.

Several other holdings gained on little news including Ciena, Eckert & Ziegler, Immutep and Howard Hughes.

On the negative side, detractors included US hospital operator Tenet Healthcare, down 13%. Tenet reported disappointing results primarily due to persistently high temporary nursing costs, a factor we expect to moderate in 2023 as Covid induced staff absences normalise. Covid shortages also led to reduced procedure volumes, which weighed on the stock.

US music streaming service Spotify also declined 6% after reporting weaker than expected results. We expect the company to follow Apple Music’s recent price rise in the coming months, despite competitive pressure from Amazon’s recent offer of free music to Prime subscribers.

Opthea, Genetic Signatures and Ardent Leisure fell on little news.

 


PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
25.1%
NUMBER OF STOCKS
17
BETA4
0.63
MAXIMUM DRAW DOWN
-32.1%

FEATURES

  • APIR CODE HHA0020AU
  • REDEMPTION PRICEA$ 0.9175
  • FEES * Management Fee: 1.80% p.a. (Class A) | 1.25% p.a. (Class B)
    Performance Fee: 15.38% (Class A) | 20% (Class B)
  • Minimum initial investment A$10,000
  • FUM AT MONTH END A$ 37.72m
  • STRATEGY INCEPTION DATE 11 December 2014
  • BenchmarkRBA Cash Rate + 3%

Fund Managers

James McDonald

Portfolio Manager

Jeremy Bendeich

Portfolio Manager

Description

The Pengana High Conviction Equities Fund (the Fund) invests globally in a concentrated portfolio of up to 20 stocks. The Fund can invest in both small and large cap stocks and is diversified across countries and sectors. We avoid investment in companies that are currently, in our opinion, unnecessarily harmful to people, animals or the environment.

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1. Net performance figures are shown are those of Class A Units, 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.
2. Inception 11 December 2014.
3. Annualised standard deviation since inception.
4. Relative to MSCI World. Using daily returns.
* For further information regarding fees please see the PDS available on our website.