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Pengana International Equities Limited (ASX: PIA)

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

March 2024 - Monthly REPORT

March Report

SHARE PRICE

NTA POST-TAX

NTA PRE-TAX

INVESTMENT PERFORMANCE1

DIVIDEND YIELD2

CONSECUTIVE QUARTERLY 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

  • Global share markets continued to perform well in March as inflationary pressures around the world moderate.
  • Equity gains were driven by value stocks as share price gains extended to a broader range of the market.
  • The Portfolio returned 0.4% in March, while the benchmark returned 3.0%.

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.
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.
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.
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.
Netflix Inc
United States
Communication Services
Netflix, Inc. engages in providing entertainment services. It also offers activities for leisure time, entertainment video, video gaming, and other sources of entertainment. It operates through the United States and International geographic segments. The company was founded by Marc Randolph and Wilmot Reed Hastings on August 29, 1997 and is headquartered in Los Gatos, CA.
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.
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.
See Portfolio Breakdown

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Mar 2024 1
1M 1Y 3Y Pengana SI
July 20171
(ASX: PIA) 0.4% 25.7% 5.1% 9.3%
Index2 3% 28.4% 14.3% 13.6%

Swipe horizontally to see all columns

COMMENTARY

Market Review 

Global equity markets made positive gains in March.

The US Federal Reserve kept its benchmark rate unchanged at 5.25 – 5.50% for the fifth consecutive meeting, while continuing to signal three rate cuts this year. Both the Bank of England and European Central Bank also kept rates unchanged. However, the Swiss National Bank unexpectedly reduced interest rates by 0.25% to 1.50% as inflation returned to the bank’s target range.

The Bank of Japan raised short-term interest rates, ending the country’s decade-long era of negative interest rates. In contrast, the People’s Bank of China introduced measures to re-invigorate its moribund economy, including reducing the cash-reserve requirements for banks, freeing up more funds for lending.

European stocks also outperformed, led by strong returns in Spain, Italy, and Denmark. Pacific ex-Japan stocks underperformed, impacted by poor returns in Hong Kong, which were weighed down by ongoing economic weakness on the Chinese mainland. Poor returns in China also detracted from returns in emerging markets, although this was offset by strong performance in Taiwan and South Korea.

Energy and Materials were the strongest performing sectors, aided by higher oil and precious metal prices. Consumer discretionary and consumer staples were the weakest performing sectors. Information Technology also underperformed, dragged down by the poor performance of index heavyweights like Apple.

Portfolio Commentary

The Portfolio underperformed the benchmark during March. Value stocks outperformed growth as the share market recovery broadened, following strong outperformance by growth companies at the start of the year. Strong performance by the Portfolio’s holdings in materials and real estate and the underweight position in consumer discretionary boosted relative returns. However, this was offset by weaker performance by the Portfolio’s holdings in information technology, healthcare and financials.

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

The strongest contributor to relative returns during March was the overweight position in US-based agricultural equipment manufacturer Deere. The stock outperformed upon rising sentiment in the agricultural sector, driven by stronger commodity prices, which should support increased capital investment.

The US-based global technology group Alphabet outperformed after announcing it was in talks with Apple to include Google’s Gemini AI technology into the iPhone. This would help Google maintain its market leading position in internet search.

The Portfolio’s holding in US-based Vertex Pharmaceuticals detracted from relative returns in March. This followed concerns around a lull in its drug development pipeline and progress on its phase 3 trial for an acute pain treatment.

Hong Kong-based China life insurer AIA Group also detracted from the Portfolio’s relative performance. Weakness in China’s economy has impacted investor sentiment across the Hong Kong and China stock markets. Investors were further disappointed when it failed to announce more stock repurchases.

The Portfolio established a new position in US-based Booking Holdings, an online travel agency which owns brands such as Booking.com, Priceline and Agoda. It benefits from an experienced management team, positive free cash flow generation and a strong competitive position in the US, European, and Asian markets. The global travel market remains fragmented, with only about half of total bookings made online. Continuing adoption of online booking and the company’s recent expansion into airline tickets and alternative accommodation are expected to drive future earnings growth.

The Portfolio also opened a new position in US-listed – but Argentina-based – Globant. The company specialises in designing and building cloud applications, data-analytics solutions, cybersecurity solutions, and mobile-optimised user interfaces. The company helps customers improve their digital interactions as businesses undertake major digital transformation initiatives to better engage with customers, counterparties and employees. Rising corporate demand for digital solutions and Globant’s ability to win market share is expected to drive earnings growth over the next decade.

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY 3
12.7%
NUMBER OF STOCKS
58
BETA 4
0.74

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$ 1.318
    28/03/2024
  • NTA Pre Tax ** A$ 1.399
    28/03/2024
  • Price Close ** A$ 1.170
  • Shares On Issue ** 257.17m
  • Premium/Discount to pre-tax NTA ** -16.4%
  • 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

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$.