CLOSE
BACK

OUR FUNDS

CLOSE

Pengana International Equities Limited (ASX: PIA)

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

December 2022 - Monthly REPORT

December report

SUMMARY

  • Global share markets fell in December upon central bank comments which suggested global interest rates have further to rise and will remain elevated throughout 2023
  • Chinese stocks continued to rebound as the zero-Covid policy was abruptly unwound, raising hopes this will support the global economic recovery
  • The Portfolio returned -5.6% in December, while the benchmark returned -5.4%

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.
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.
First Republic Bank
United States
Financials
First Republic Bank and its subsidiaries provide private banking, private business banking and private wealth management in urban, coastal markets in the U.S. First Republic delivers relationship-based service by providing a single point of contact for all of its services.
HDFC Bank Ltd
India
Financials
HDFC Bank Ltd. offers a wide range of services to the global corporate sector. The Bank provides corporate banking and custodial services and is active in the treasury and capital markets. HDFC also markets project advisory services and capital market products such as Global Deposit Receipts, Euro currency loans, and Euro currency bonds.
Microsoft
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.
Synopsys Inc
United States
Information Technology
Synopsys, Inc. supplies electronic design automation solutions to the global electronics market. The Company provides design technologies to creators of advanced integrated circuits, electronic systems, and systems on a chip. Synopsys also provides consulting services and support to its customers to streamline the overall design process and accelerate time to market.
UnitedHealth Group Inc
United States
Health Care
UnitedHealth Group Incorporated owns and manages organized health systems. The Company provides employers products and resources to plan and administer employee benefit programs. UnitedHealth serves customers in the United States.
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 Table

NET PERFORMANCE FOR PERIODS ENDING 31 Dec 20221
1M 1Y 3Y Pengana SI
July 20171
(ASX: PIA) -5.6% -25.9% 1.2% 5.5%
Index2 -5.4% -12.2% 6.2% 10%

Swipe horizontally to see all columns

Performance Chart

NET PERFORMANCE SINCE MANDATED

COMMENTARY

Market Review 

The MSCI World Total Return Index, Net Dividend Reinvested, AUD returned -5.4% in December.

Investor sentiment weakened when the US Federal Reserve (Fed) increased interest rates by 0.50% to a new target range of 4.25% – 4.50%. While this was expected, the Fed also indicated that it now expects rates to reach a peak above 5.0%. This reflects the strong US labour market, with unemployment at a historic low level of just 3.7% putting upward pressure on wages. The Fed continued to suggest interest rates would remain high throughout 2023, not starting to fall back until next year.

The European Central Bank and the Bank of England also increased interest rates by 0.50% in December. The Bank of Japan signalled a potential end to its ultra-accommodative monetary policy, which sent the yen soaring.

Shares in China and Hong Kong enjoyed a relief rally after the government rolled back the country’s zero-COVID policy, following unusual but widespread protests. This is expected to support global growth in the medium-term, despite rising infection numbers.

Portfolio Comment

During December, global value stocks outperformed growth by 3.2% in Australian dollar terms, as global central bank monetary policy remained restrictive. All market sectors except energy posted negative returns in December.

The Portfolio benefitted from positive stock selection in financials, overweight positions in healthcare and industrials, and the underweight position in consumer discretionary. However, negative stock selection in healthcare and consumer staples, the overweight position in information technology, and the underweight position in consumer staples detracted from relative returns.

The Portfolio recently established a position in the high-quality, durable growth consumer staples company Costco Wholesale, which is a US retail warehouse operator. Its business model benefits from membership fees and bulk sales, offering members low prices on a limited selection of both brand name and store-labelled products.

This model has proven to be resilient, offering the lowest unit prices in the US retail market, which has brought strong customer loyalty and low operating costs. The company is already a well-run business with strong profitability, but its future growth will be helped by its expansion into international markets such as Mexico and China.

US biopharmaceutical company Vertex Pharmaceuticals underperformed the market in December, when investors realised gains following strong year-to-date performance.

US-based fixed income trading platform Tradeweb, which is in the financials sector, contributed to relative returns when the company announced a partnership with BlackRock to enhance electronic bond trading.

Weak stock selection in the Eurozone detracted from relative performance in December. This included the French luxury goods conglomerate Kering, which faced slowing sales momentum in China, and whose Balenciaga brand was marred by controversies.

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY3
11.5%
NUMBER OF STOCKS
65
BETA4
0.82

FEATURES

  • 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$ 1.114
  • NTA Pre Tax ** A$ 1.084
  • Price Close ** A$ 0.920
  • Shares On Issue ** 256.47m
  • Premium/Discount to pre-tax NTA ** -15.2%
  • DRP Yes

Portfolio Managers

Peter Baughan

Portfolio Manager

Jingyi Li

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, that exists 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 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 Ethical Fund
Axiom International Ethical Fund
Axiom International Ethical Fund (Hedged)
Axiom International Ethical 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

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