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Monthly REPORT January 2021
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Pengana International Ethical Fund

  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

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.

Top Holdings (alphabetically)

Alibaba Group Holding LTD China Consumer Discretionary
Charter Communications Inc United States Communication Services
Cigna Corp United States Health Care
Dollar Tree Inc United States Consumer Discretionary
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
Alibaba Group Holding LTD
Consumer Discretionary China
Charter Communications Inc
Communication Services United States
Cigna Corp
Health Care United States
Dollar Tree Inc
Consumer Discretionary United States
Houlihan Lokey Inc
Financials United States
Indus Towers Ltd
Communication Services India
Lumentum
Information Technology United States
Tencent Holdings
Communication Services China
Thermo Fisher Scientific
Health Care United States
UnitedHealth Group Inc
Health Care United States

Sector Breakdown

Capitalisation Breakdown

Region Breakdown

Segment

Fund Performance NET PERFORMANCE FOR PERIODS ENDING 31 Jan 20211

1 Month1 Year3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund 1.4%15.1%12.6%12.4%11.5%
Benchmark 0.1%2.1%9.9%11.7%9.9%
1 Month1 Year3 Years P.A.5 Years P.A.SINCE INCEPTION
Fund
1.4%
15.1%
12.6%
12.4%
11.5%
Benchmark
0.1%
2.1%
9.9%
11.7%
9.9%

Fund Performance 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.

STATISTICAL DATA FUND PORTFOLIO SUMMARY

VOLATILITY3 9.5% NUMBER OF STOCKS 35
BETA (USING DAILY RETURNS)4 0.76 MAXIMUM DRAW DOWN -9.4%
  • VOLATILITY 9.5%
  • BETA (USING DAILY RETURNS) 0.76
  • NUMBER OF STOCKS 35
  • MAXIMUM DRAW DOWN -9.4%

Fund Managers

Jordan Cvetanovski

CIO & Portfolio Manager

Steven Glass

Deputy Portfolio Manager & Analyst

Features

  • PORTFOLIO MANAGERS Jordan Cvetanovski
    Steven Glass
  • APIR CODE HOW0002AU
  • REDEMPTION PRICEA$ 3.2683
  • FEES * Management Fee: 1.35% p.a
  • Minimum initial investment $25,000
  • FUM AT MONTH END A$ 374.13m
  • STRATEGY INCEPTION DATE 1 July 2015
  • BenchmarkMSCI All Country World Total Return Index (net, AUD)

Description

The Pengana International Ethical 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 are, in our opinion, 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. Net performance figures are shown after all fees and expenses and assume reinvestment of distributions. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. A new strategy was implemented for the Pengana International Ethical Fund from 1 July 2017 by the Pengana team. The financial information refers to the strategy currently employed by the Pengana International Ethical.

From July 2017, performance figures are those of the Pengana International Ethical Fund (the “Fund”) 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 Fund. From July 2017 the Fund has been managed by the same team and with the same portfolio construction strategy as the Pengana International Fund, complemented by strict ESG filters and processes. 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.