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Monthly REPORT November 2020
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Pengana International Equities Limited (ASX: PIA)

  The reflation trade

Summary

In Nov-20 the Portfolio delivered 6.2%, which was a strong outcome while still trailing the Market which delivered 7.5%. The stocks generating the largest positive returns were Mowi, Cigna, and Biotelemetry.

The month’s trading was characterized as the reflation trade with the impetus being the strong results from various Covid vaccine trials and the belief that this will be the catalyst for economic growth in 2021. This resulted in a sharp and meaningful swing away from growth and to value stocks, with the former being a play on disruption-led growth and the latter on economic growth.

In Nov-20 the Portfolio delivered 6.2%, which was a strong outcome while still trailing the Market which delivered 7.5%. The stocks generating the largest positive returns were Mowi, Cigna, and Biotelemetry.

We do not have large exposure to the growth-at-any price stocks meaning our weaker stocks did not come from that part of the market. Rather, the largest detractors were Alibaba and Tencent, with their performance explained by mushrooming Chinese regulation of dominant tech platforms.

The Portfolio is meaningfully differentiated to the Benchmark with 26% of the Portfolio invested in Europe ex-UK vs the Benchmark’s 15% and 45% invested in North America vs the Benchmark’s 69%. Further, the Portfolio has fully exited the FAANG’s and has 8% invested in the IT sector vs the Benchmark’s 21%.

Finally, the portfolio is on a c5% FCF yield, 8% revenue CAGR and the companies in the fund have virtually no debt, all of which compare favourably to the broader market.

All portfolio holdings were compliant with the principles of the UN Global Compact and the portfolio had a “low ESG risk” rating, based on the aggregate weighted score of the portfolio’s holdings at month-end (source: Sustainalytics).

Top Holdings (alphabetically)

Bharti Infratel India Communication Services
Charter Communications Inc United States Communication Services
Cigna Corp United States Health Care
Houlihan Lokey Inc United States Financials
Lumentum United States Information Technology
Pinterest Inc United States Communication Services
Rakuten Inc Japan Consumer Discretionary
SIG Combibloc Group AG Switzerland Materials
Tencent Holdings China Communication Services
UnitedHealth Group Inc United States Health Care
Bharti Infratel
Communication Services India
Charter Communications Inc
Communication Services United States
Cigna Corp
Health Care United States
Houlihan Lokey Inc
Financials United States
Lumentum
Information Technology United States
Pinterest Inc
Communication Services United States
Rakuten Inc
Consumer Discretionary Japan
SIG Combibloc Group AG
Materials Switzerland
Tencent Holdings
Communication Services China
UnitedHealth Group Inc
Health Care United States

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

Portfolio Performance NET PERFORMANCE FOR PERIODS ENDING 30 Nov 20201

1 Month1 Year3 Years P.A.5 Years P.A.10 Years P.A.SINCE MANDATED
Fund 6.2%15.4%12.2%8.7%10.5%12.6%
Benchmark 7.5%5.1%10.6%10.5%13.1%12.4%
1 Month1 Year3 Years P.A.5 Years P.A.10 Years P.A.SINCE MANDATED
Fund
6.2%
15.4%
12.2%
8.7%
10.5%
12.6%
Benchmark
7.5%
5.1%
10.6%
10.5%
13.1%
12.4%

Portfolio Performance NET PERFORMANCE SINCE MANDATED

Commentary

The month’s trading was characterized as the reflation trade with the impetus being the strong results from various Covid vaccine trials and the belief that this will be the catalyst for economic growth in 2021. This resulted in a sharp and meaningful swing away from growth and to value stocks, with the former being a play on disruption-led growth and the latter on economic growth.

In Nov-20 the Portfolio delivered 6.2%, which was a strong outcome while still trailing the Market which delivered 7.5%. The stocks generating the largest positive returns were Mowi, Cigna, and Biotelemetry.

We do not have large exposure to the growth-at-any price stocks meaning our weaker stocks did not come from that part of the market. Rather, the largest detractors were Alibaba and Tencent, with their performance explained by mushrooming Chinese regulation of dominant tech platforms.

The Portfolio is meaningfully differentiated to the Benchmark with 26% of the Portfolio invested in Europe ex-UK vs the Benchmark’s 15% and 45% invested in North America vs the Benchmark’s 69%. Further, the Portfolio has fully exited the FAANG’s and has 8% invested in the IT sector vs the Benchmark’s 21%.

Finally, the portfolio is on a c5% FCF yield, 8% revenue CAGR and the companies in the fund have virtually no debt, all of which compare favourably to the broader market.

All portfolio holdings were compliant with the principles of the UN Global Compact and the portfolio had a “low ESG risk” rating, based on the aggregate weighted score of the portfolio’s holdings at month-end (source: Sustainalytics).

STATISTICAL DATA (Since Mandated) FUND PORTFOLIO SUMMARY

VOLATILITY3 8.5% NUMBER OF STOCKS 34
BETA4 0.67 MAXIMUM DRAW DOWN -7.7%
  • VOLATILITY 8.5%
  • BETA (USING DAILY RETURNS) 0.67
  • NUMBER OF STOCKS 34
  • MAXIMUM DRAW DOWN -7.7%

Portfolio Managers

James McDonald

CIO

Features

  • PORTFOLIO MANAGERS James McDonald
  • ASX CODE PIA
  • FEES Management Fee: 1.23% p.a.
    Performance Fee: 15.38% of any return greater than the MSCI World***
  • INCEPTION DATE 19 March 2004
  • MANDATED 1 July 2017
  • BenchmarkMSCI World Total Return Index, Net Dividend Reinvested, in A$
  • NTA Post Tax ** A$ 1.326
  • NTA Pre Tax ** A$ 1.378
  • Price Close ** A$ 1.300
  • Units On Issue ** 254.49m
  • Premium/Discount to pre-tax NTA ** -5.6%
  • DRP Yes

Description

Pengana International Equities Limited provides access to the benefits of an actively managed core portfolio of 30-50 ethically screened companies across developed and developing global markets via a listed investment company structure. Investments are made predominantly in companies that deliver stable yet growing free cash flow throughout cycles (which we classify as ‘Core’ holdings) whilst also taking positions in more cyclical companies (‘Cyclical’) and those whose valuation has been materially misconstrued by the market (‘Opportunistic’). We avoid investments in companies that in our opinion are harmful to people, animals or the environment.

Explore our funds

International Fund High Conviction Property Securities Fund Australian Equities Fund International Ethical Fund
Global Small Companies Fund WHEB Sustainable Impact Fund Emerging Companies Fund High Conviction Equities Fund
Pengana International Equities Limited (ASX: PIA) International Fund - Ethical Opportunity Private Equity Trust (ASX: PE1) Alpha Israel Fund
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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. 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
**. As at the last day of last month prior to publishing of this report. The figures are unaudited.
***. MSCI World refers to the MSCI World Total Return Index, Net Dividends Reinvested, in A$.