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International Fund - Ethical Opportunity

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January 2021 - Monthly REPORT

Monthly Report

SUMMARY

The largest market-related news event during January was the performance of heavily shorted shares including GameStop, Bed Bath & Beyond, and Blackberry. These price moves were driven mainly by retail investors, facilitated by Reddit’s WallStreetBets chat room and free trading on platforms like Robinhood. Hedge Funds that were heavily short these stocks sustained material losses that will be difficult for them to recover from. For example, Melvin Capital was reported to have declined >50% during the month.

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 Electronic Arts United States Communication Services Houlihan Lokey Inc United States Financials Indus Towers Ltd India Communication Services Lumentum United States Information Technology Tencent Holdings China Communication Services Thermo Fisher Scientific United States Health Care UnitedHealth Group Inc United States Health Care

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

PERFORMANCE

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE FOR PERIODS ENDING 31 Jan 20211
1 Month1 Year3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund 1.2%14.3%12.1%12.3%11.4%
Benchmark 0.1%2.1%9.9%11.7%9.9%
1 Month1 Year3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund
1.2%
14.3%
12.1%
12.3%
11.4%
Benchmark
0.1%
2.1%
9.9%
11.7%
9.9%

PERFORMANCE SINCE STRATEGY INCEPTION

NET PERFORMANCE SINCE INCEPTION2

COMMENTARY

The largest market-related news event during January was the performance of heavily shorted shares including GameStop, Bed Bath & Beyond, and Blackberry. These price moves were driven mainly by retail investors, facilitated by Reddit’s WallStreetBets chat room and free trading on platforms like Robinhood. Hedge Funds that were heavily short these stocks sustained material losses that will be difficult for them to recover from. For example, Melvin Capital was reported to have declined >50% during the month.

As is typical on Wall Street, when there is blood in the streets, the sharks will circle. The sharks looked through the portfolios of the Hedge Funds experiencing the most pain and commenced selling their long positions, in anticipation that the weakened Hedge Funds would have a flood of redemptions and be forced sellers. This created some opportunities, which we took advantage of, and we added one new name (currently undisclosed) to the portfolio, however, in aggregate the portfolio remained relatively unchanged.

The portfolio remains meaningfully differentiated from the Market. Approximately 43% of the fund is invested in the US, vs the Market’s c55% weight, it does not hold a single FAANG stock, and it is overweight Europe and Asia. In aggregate, we calculate the fund is on a c5% FCF yield, 10% revenue growth, and has zero debt (the companies held by the fund are actually net cash). These metrics compare favourably to the broader market, which gives us some optimism about the Fund’s outlook.

PROFILE

STATISTICAL DATA

PORTFOLIO SUMMARY
VOLATILITY3
9.5%
NUMBER OF STOCKS
35
BETA4
0.76

FEATURES

  • APIR CODE HHA0002AU
  • REDEMPTION PRICEA$ 2.8126
  • FEES * Management Fee: 1.5%
  • Minimum initial investment Closed to new investors (existing investors may make additional investments)
  • FUM AT MONTH END A$ 62.87m
  • STRATEGY INCEPTION DATE 1 July 2015
  • BenchmarkMSCI All Country World Total Return Index in AUD**

Fund Managers

James McDonald

CIO

Description

“The Pengana International Fund – Ethical Opportunity (the Fund) is a long only fund that holds 30-50 companies across developed and developing markets, large and small companies. The Fund predominantly invests 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 investment in companies that, in our opinion, are harmful to people, animals or the environment. Important Note: There are significant accumulated tax losses contained within the Fund which may benefit existing investors.
We have accordingly closed the Fund to new investors in order to maintain the interests of existing investors. We strongly urge you to seek tax advice if you are an investor in the Fund, to understand how this may benefit you.

EXPLORE OUR FUNDS

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Axiom International Fund
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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
CONTACT INVESTOR SERVICES
INVEST NOW

1.2. A new strategy was implemented for the Pengana International Fund – Ethical Opportunity from 1 July 2017 by the Pengana team. The financial information below refers to the strategy currently employed by the Fund. For full performance history of the Fund, please refer to the Pengana website. From July 2017, performance figures are those of the Hunter Hall Pengana International Fund – Ethical Opportunity’s class A units (net of fees). Between July 2015 and June 2017, performance figures have been recalculated by adjusting the Pengana International Fund’s (ARSN 610 351 641) net returns to reflect the management fee of the Pengana International Fund – Ethical Opportunity. From July 2017, the Pengana International Fund – Ethical Opportunity has been managed by the same team and with the same strategy as the Pengana International Fund. The Pengana International Fund’s net track record data is historical. Past performance is not a reliable indicator of future performance. The value of the investment can go up or down.
3. Annualised standard deviation since inception. 4. Relative to the MSCI All Country World Total Return Index in AUD.
* For further information regarding fees please see the PDS available on our website.
**The benchmark was changed from MSCI World Total Return Index (net, AUD) effective 6 June 2017.
Important Note: There are significant accumulated tax losses contained within the Fund which may benefit existing investors.
We have accordingly closed the Fund to new investors in order to maintain the interests of existing investors. We strongly urge you to seek tax advice if you are an investor in the Fund, to understand how this may benefit you.