International Fund

June 2020 - Monthly REPORT

Quarterly wrap up and a look to the future


The last quarter has certainly been an event-filled 3 months. Steven Glass, deputy portfolio manager of the Pengana International Equities range of funds provides a regroup on what has been affecting markets for the past 3 months, and how the team has positioned the portfolio for performance through the volatility, and into the future.


Top Holdings (alphabetically)

Bharti Infratel India Communication Services Charter Communications Inc United States Communication Services Flow Traders Netherlands Financials Houlihan Lokey Inc United States Financials Mowi ASA Norway Consumer Staples Newmont Mining (USD) United States Materials Pinterest Inc United States Communication Services Rakuten Inc Japan Consumer Discretionary Thermo Fisher Scientific United States Health Care UnitedHealth Group Inc United States Health Care

Sector Breakdown

Capitalisation Breakdown

Region Breakdown




1 Month1 Year3 Years P.A.SINCE INCEPTION
Fund -1.3%16.1%12.6%10.9%
Benchmark -0.5%4.1%10.0%8.8%
1 Month1 Year3 Years P.A.SINCE INCEPTION




The quarter was punctuated with April Fools Day, May Day and Juneteenth (19 June). Juneteenth is a uniquely American day, but it is the one that arguably has the greatest global significance and it is symbolic to some of our most critical investment thinking.

More broadly, Juneteenth provokes consideration of inequality.

One source of inequality is the wealth divide across the world. Wages have been stagnant while asset prices have been ballooning, resulting in the asset owners (the rich) richer and the working class being left behind. Not only are the working masses not participating in the asset-inflation wealth effect, but they are less able to afford asset accumulation owing to the inflating prices, as demonstrated by the increasing challenges faced by new home buyers.

The Gini index is a statistical measure that represents the income or wealth distribution of a nation. The index ranges from zero to one hundred. A low index value (i.e. zero) represents perfect equality, where everyone has the same income/wealth, and a high index value (i.e. one hundred) represents the maximum inequality (i.e. a small number of people have all the wealth and the others have none). The Gini index tells us a lot about a society. High Gini indexes are normally associated with Kleptocracies (or broken societies), whereas low Gini indexes are often associated with stable countries that have a high standard of living.

The tables below illustrate the Gini indexes for a sample of countries. Countries with high inequality are ranked highly (i.e. South Africa has the highest level of inequality) and countries with high equality have a low rank (i.e. Sweden has a high level of equality). The data demonstrates that Australia is quite an egalitarian society as are many European nations. It also highlights that Hong Kong is highly elitist as is the US. In fact, the US is only marginally more egalitarian than Peru and has higher inequality than Cameroon and Iran! It is no wonder that the US and Hong Kong are tinderboxes for social unrest.


Rank County Gini index
1 South Africa 62.5
2 Haiti 60.8
3 Zambia 57.5
4 Hong Kong 53.9
5 Guatemala 53.0
29 Peru 45.3
30 USA 45.0
31 Cameroon 44.6
32 Iran 44.5

Rank County Gini index
93 Australia 30.3
94 Netherlands 30.3
95 Switzerland 29.5
96 France 29.3
97 Denmark 29
101 Germany 27.0
102 Norway 26.8
108 Sweden 24.9


We consider the above findings on the US and HK alarming. In this quarterly commentary we explain examples of how we consider these issues in portfolio management. 

It is critical to be asset owners. Low interest rates appear to be here to stay and there is scant evidence of wage growth. In this environment we think it is important to allocate as much income as possible to income-generating assets, such as stocks. There will be ups and downs from holding these assets, but over the long term the direction has been positive. This partly explains why the investment philosophy involves holding a minimum 80% of the Fund’s assets in equities.

A growing wealth divide can create investment opportunities. For consumer-facing businesses these opportunities lie on the two barbells of consumer consumption. At one end are luxury goods companies like LVMH, Kering (owner of Gucci), Hermes, Apple, Nike, and Adidas. At the other end are discount retailers such as Dollar Tree, Dollar General, B&M European Value Retail. The Fund has previously held shares in Dollar General and B&M, and Dollar Tree is currently maintains a meaningful position. 

The wealth gap is also providing opportunities in less obvious industries. As companies caught in the middle are hollowed out, we anticipate a meaningful increase in corporate bankruptcies. This will be a long-term structural benefit to the investment in Houlihan Lokey (HLI).

The importance of our investment views was laid bare during the quarter. After an initial plunge in the stock market due to the COVID-crisis, central banks stepped in, slashed interest rates and pumped liquidity into global markets, fuelling a breathtaking stock market rally. In this environment it paid to be well invested across a diversified portfolio of conservative stocks.

In this environment the Fund performed well, delivering 10.1% over the quarter. Newmont was a notable contributor to performance, alongside Abiomed and Bharti Infratel.

While the portfolio’s quarterly return was pleasing, it is important to take a long-term perspective. Over the last 5 years, we have witnessed a concentrated growth-company bull market, Brexit, Trump being elected as the US president, US-Sino trade war, impeachments in Brazil, 3 Australian prime ministers, demonetization in India, European debt crisis, Indian elections, Covid-crisis, negative interest rates for the first time in human history, and market swings into cyclicals and then back into growth. The list could go on but the key message is we have collectively experienced seemingly inexplicable events.

Maintaining a strong conviction is a challenge for any investment manager, especially during periods of uncertainty and so it is pleasing to see that the Pengana International Fund’s investment philosophy and process has remained consistent. The Fund continued to hold highly cash flow generative and growing businesses that have fortress balance sheets, fair valuations, and high ESG standards. The portfolio was diversified across industries, underlying exposures, geographies, and market cap ranges, and did not rely on binary outcomes.

Over the five years, the Fund returned 10.9% pa, with 9.7%  volatility, which compares favourably to the broader market which returned 8.8% pa with 11.0% volatility.

In aggregate, the last five years have been a wonderful demonstration of our process and we believe are a harbinger of what is to come. We thank you for joining us on our first five-year journey and look forward to the next five years.





  • FEES * Management Fee: 0.974%
    Performance Fee: Nil
  • Minimum initial investment $25,000
  • FUM AT MONTH END A$ 98.29m
  • BenchmarkMSCI All Country World Total Return Index in AUD

Fund Managers


The Pengana International Fund invests in 30-50 companies across developed and developing markets, large and small companies. The Fund predominantly invests in franchises 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’).


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. 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. Inception 1st July 2015.
3. Annualised standard deviation since inception.
4. Relative to MSCI All Country World Total Return Index in AUD
* For further information regarding fees please see the PDS available on our website.