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Pengana International Equities Limited (ASX: PIA)

The largest International Ethical LIC on the ASX. Targeting fully franked dividends, paid quarterly.

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February 2021 - Monthly REPORT

Growing inflation expectations

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NTA POST-TAX

NTA PRE-TAX

INVESTMENT PERFORMANCE1

DIVIDEND YIELD2

CONSECUTIVE DIVIDENDS PAID

1. Investment performance since new mandate adopted 1 July 2017.
2. Dividend yield is based on current displayed share price and dividends declared over the previous 12 months
3. Grossed up yield is based on current displayed share price, dividends declared over the previous 12 months and the tax rate and franking percentage applicable for the most recently declared dividend

SUMMARY

February was an extraordinary month within a normally placid bond market. Catalysed by growing inflation expectations, longer-dated bond yields rose by relatively large amounts and the spread of nominal yields and real yields widened. This had an immediate negative impact on growth stocks, which declined, while reflation stocks rebounded.

View full commentary here

PORTFOLIO

Top Holdings (alphabetically)

Alibaba Group Holding LTD China Consumer Discretionary Charter Communications Inc United States Communication Services Cigna Corp United States Health Care Houlihan Lokey Inc United States Financials Indus Towers Ltd India Communication Services Lumentum United States Information Technology Pinterest Inc United States Communication Services Rakuten Inc Japan Consumer Discretionary Tencent Holdings China Communication Services UnitedHealth Group Inc United States Health Care
See Portfolio Breakdown

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 28 Feb 20211
1 Month1 Year3 Years P.A.SINCE MANDATED
Fund 1.5%18.3%12.3%12.8%
Benchmark 1.6%7.7%11.0%11.8%
1 Month1 Year3 Years P.A.SINCE MANDATED
Fund
1.5%
18.3%
12.3%
12.8%
Benchmark
1.6%
7.7%
11.0%
11.8%

COMMENTARY

February was an extraordinary month within a normally placid bond market. Catalysed by growing inflation expectations, longer-dated bond yields rose by relatively large amounts and the spread of nominal yields and real yields widened. This had an immediate negative impact on growth stocks, which declined, while reflation stocks rebounded.

We have long argued that inflation is arguably the most significant risk facing the stock market and we continue to vigilantly monitor that risk.

Some of the portfolio’s positions that should benefit from inflation and performed well, as anticipated, during Feb-21 include ING, Epiroc, Mowi, CME, Vulcan Materials, and Flow Traders.

Meanwhile, the portfolio’s ‘growthier’ stocks that we anticipate to be most negatively impacted by rising rates were the weaker performers during the month and include, Thermo Fisher, Alibaba, Sunrun, and Electronic Arts. In aggregate the stocks performed as we would expect given an inflation scare, which provides us with a working compass should we choose to tilt the portfolio more meaningfully towards the reflation trade.

The portfolio remained relatively unchanged during the month and we added just one ‘growthier’ stock that was sold off during Feb-21. In aggregate, the portfolio remains highly differentiated from the market with 46% invested in the US Vs the Benchmark’s 66% and 28% invested in Europe (ex-UK) Vs the Benchmark’s 15%. It is a similar story when viewed along sector exposure lines with the portfolio meaningfully overweight Materials and underweight Information Technology and does not own a single FAANG stock.

By our analysis, the portfolio has an approx. 5.5% FCF yield, 8% revenue growth, and <1x net debt/EBITDA, all of which compare favourably to the market. These factors coupled with our diversification and various risk controls give us confidence in the outlook for the Fund.

 

UPCOMING WEBINAR

The portfolio managers will be hosting a webinar for investors entilted: Finding opportunities in an environment of low interest rates, increased inflation expectations and a growing wealth divide.

You are invited to register at pengana.com/webinar-series

 

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY3
8.2%
NUMBER OF STOCKS
36
BETA4
0.66

FEATURES

  • ASX CODE PIA
  • FEES Management Fee: 1.23% p.a.
    Performance Fee: 15.38% of any return greater than the Index***
  • INCEPTION DATE 19 March 2004
  • MANDATED 1 July 2017
  • BenchmarkMSCI World Total Return Index, Net Dividend Reinvested, in A$ ("Index")
  • NTA Post Tax ** A$ 1.346
    26/02/2021
  • NTA Pre Tax ** A$ 1.391
    26/02/2021
  • Price Close ** A$ 1.300
  • Shares On Issue ** 254.68m
  • DRP Yes

Portfolio Managers

Peter Baughan

Portfolio Manager

Jingyi Li

Portfolio Manager

Rick Schmidt

Portfolio Manager

Description

Pengana International Equities Limited (trading on the ASX as PIA) is the largest international ethical Listed Investment Company (“LIC”) on the ASX. PIA’s objective is to provide shareholders with capital growth as well as regular, reliable, and fully franked dividends.

The strategy aims to generate superior risk-adjusted returns, through investing in an actively managed portfolio of global companies that meet the investment team’s high-quality and durable growth criteria at reasonable prices. A robust ethical framework provides an added layer of risk mitigation.

These companies are identified through the conduct of fundamental research, with a long-term, global perspective, and must exhibit the following four key investment criteria: competitive advantages, quality management, financial strength, and sustainable growth potential.

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
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INVEST NOW

1. As at the last day of last month prior to publishing of this report. Performance figures refer to the movement in net assets per share, reversing out the impact of option exercises and payments of dividends, before tax paid or accrued on realised and unrealised gains. 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 date of PIA: 19 March 2004, new investment team with new mandate adopted: 1 July 2017. Pengana International Equities Limited has been managed under the new investment mandate by the Pengana investment team since 1 July 2017. The performance since mandated in the table above refers to the movement in net assets per share since the new mandate adopted on 1 July 2017.

3. Annualised Standard Deviation since mandated
4. Relative to MSCI World Total Return Index, Net Dividends Reinvested
**As at the last day of last month prior to publishing of this report. The figures are unaudited.
*** Index/MSCI World refers to the MSCI World Total Return Index, Net Dividends Reinvested, in A$.