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Pengana International Equities Limited (ASX: PIA)

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

December 2024 - Monthly REPORT

December Report

SHARE PRICE

NTA POST-TAX

NTA PRE-TAX

PORTFOLIO RETURN
(20 YEARS)

DIVIDEND YIELD1

CONSECUTIVE QUARTERLY DIVIDENDS PAID

1. Dividend yield is based on current displayed share price and dividends declared over the previous 12 months
2. 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

  • The Portfolio returned 3.6% in December, while the benchmark delivered 2.5%.
  • Global share markets declined in local currency terms upon persistent inflation concerns and rising geo-political uncertainty, following a strong rally in November.
  • A stronger US dollar and weaker Australian dollar ensured market and portfolio returns were positive in Australian dollar terms.

PORTFOLIO

Top Holdings (alphabetically)

Accenture Plc Class A
Ireland
Information Technology
Alphabet Inc. Class A
United States
Communication Services
Amazon.com, Inc.
United States
Consumer Discretionary
Meta Platforms Inc Class A
United States
Communication Services
Microsoft Corporation
United States
Information Technology
Netflix, Inc.
United States
Communication Services
Salesforce, Inc.
United States
Information Technology
Schneider Electric SE
France
Industrials
UnitedHealth Group Incorporated
United States
Health Care
Vertex Pharmaceuticals Incorporated
United States
Health Care
See Portfolio Breakdown

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

PERFORMANCE

Performance Table

NET PERFORMANCE FOR PERIODS ENDING 31 Dec 2024 i
1M 1Y 5Y 15Y 20Y
Total Portfolio Return 3.6% 23.7% 9.4% 9.2% 8.3%
Total Shareholder Return 5.2% 19.7% 6.2% 6.5% 4.6%
Index 2.5% 30.7% 14% 12.8% 9.3%

Swipe horizontally to see all columns

COMMENTARY

Global equity markets declined in December in local currency terms after the strong rally in November which followed the decisive US presidential election. This decline reflected concerns that persistent inflation in the US and other major economies could slow the fall in interest rates. Investor confidence was also dented by rising political uncertainty, after ruling coalitions in Germany and France lost confidence votes in their parliaments. This brings forward the general election in Germany and leaves France with a very fragile government. Meanwhile, moves by parliamentarians to impeach South Korean President Yoon Suk Yeol further impacted market sentiment.

US inflation was unchanged in November at 2.8%, which enabled the Federal Reserve (Fed) to cut interest rates by 0.25% to a range of 4.25% – 4.50% during December. However, Chairman Jerome Powell’s language after the meeting hinted at a potential pause in the current rate-cutting cycle, as inflation remains stubbornly above the Fed’s 2.0% target.

The European Central Bank also reduced its key lending rate by 0.25% to 3.00%, its fourth cut in 2024, as domestic inflation edged down. Meanwhile, the UK’s Bank of England and the Bank of Japan both kept their rates unchanged.

The strongest performing sectors in December were communications services, consumer discretionary and information technology, while materials, real estate and energy were the weakest.

Portfolio Commentary

The Portfolio returned 3.8% in December, while the benchmark delivered 2.7%. Strong stock performance in communications services and industrials and an overweight position in communications services drove relative returns. This was partially offset by weak stock selection and an overweight position in the underperforming healthcare sector.

The largest contributor to relative returns in December was the overweight position in US-based technology giant and Google-owner Alphabet. It outperformed after unveiling a new quantum computing chip, Willow, which solved in five minutes a computing problem that reportedly would take a standard computer more than a trillion years. Additionally, the company released the latest version of its AI digital assistant, Gemini 2.0, which is two times faster than Gemini 1.5.

The Portfolio’s holding in US-based semiconductor and infrastructure developer Broadcom also contributed to relative returns. It outperformed after announcing strong quarterly earnings results and forward guidance. Broadcom expects revenue from custom-made semiconductors supplied to the company’s three existing large data-centre customers to increase to US$60–90 billion in 2027, far exceeding investors’ expectations. Broadcom is a key partner to the hyperscalers—the largest data-centre operators—in building their customised application-specific integrated circuits (ASICs). Investors are only now appreciating Broadcom’s strong market position and consistent free cash flows, although it has been held in the Portfolio since early 2022.

The Portfolio’s largest detractor from relative returns in December was US-based bio-pharmaceutical manufacturer Vertex Pharmaceuticals which develops drugs to treat Cystic Fibrosis. The stock underperformed after announcing that its nonadditive drug for lower back pain had failed to perform better than a placebo in a late-stage trial.

The Portfolio was a long-term investor in US-based semiconductor developer NVIDIA before exiting its position in February 2024 due to valuation concerns. A new position was established in the stock during December. It became clear that it will take longer for emerging competitors to sufficiently narrow the technological gap with NVIDIA’s GPU chips to the extent they pose a threat to its pricing power. This made the valuation level more attractive. The company has also been developing next-generation products that extend beyond chips, including its sophisticated server rack system and development software, CUDA.

The Portfolio exited its position in US-based biopharma equipment supplier Repligen upon concerns for its future earnings growth.

PROFILE

STATISTICAL DATA (Since Mandated)

PORTFOLIO SUMMARY
VOLATILITY ii
12.8%
NUMBER OF STOCKS
55
BETA ii
0.76

FEATURES

  • ASX CODE PIA
  • FEES Management Fee: 1.23% p.a.
    Performance Fee: 15.38% of any return greater than the Indexv
  • INCEPTION DATE 19 March 2004
  • MANDATED 1 July 2017
  • BenchmarkMSCI World Total Return Index, Net Dividend Reinvested, in A$ ("Index")
  • NTA Post Tax iv A$ 1.372
    31/12/2024
  • NTA Pre Tax iv A$ 1.422
    31/12/2024
  • Price Close iv A$ 1.215
  • Shares On Issue iv 257.17m
  • Premium/Discount to pre-tax NTA iv -14.6%
  • 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

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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)
Pengana Global Private Credit Trust (ASX:PCX)
Pengana Global Private Credit Trust (ASX:PCX)
Alpha Israel Fund
Alpha Israel Fund
Pengana Diversified Private Credit Fund
Pengana Diversified Private Credit Fund

i. Performance for periods greater than 12 months is the compound annual return.

Total Shareholder Return refers to the movement in share price plus dividends declared for the period, not including the benefit of franking credits attached to dividends paid

Total Portfolio Return refers 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.

Index refers to MSCI World Total Return Index, Net Dividends Reinvested, in A$.

Past performance is not a reliable indicator of future performance, the value of investments can go up and down. None of Pengana International Equities Limited (‘PIA’), Pengana Investment Management Limited nor any of their related entities guarantees the repayment of capital or any particular rate of return from PIA. This information has been prepared by PIA and does not take into account a reader’s investment objectives, particular needs or financial situation. It is general information only and should not be considered investment advice and should not be relied on as an investment recommendation. The figures are unaudited.

Source: PCG and Bloomberg.

ii. 20 Year Annualised Standard Deviation as at the last day of the last month prior to publishing this report.

iii. Relative to MSCI World Total Return Index, Net Dividends Reinvested, 20 Year annualised Beta as at the last day of the last month prior to publishing this report.

iv. As at the last day of last month prior to publishing of this report. The figures are unaudited.

v. Index/MSCI World refers to the MSCI World Total Return Index, Net Dividends Reinvested, in A$.