TIME TO REMAIN CONSERVATIVE
PERFORMANCE
Performance Table (In NZ$)
NET PERFORMANCE FOR PERIODS ENDING 30 Apr 20201
Performance Chart
NET PERFORMANCE SINCE INCEPTION2
PORTFOLIO
Top Holdings (alphabetically)
PROFILE
Platform Availability
- AET Wholesale Access Fund
- Asgard Element (Masterfund)
- Asgard Infinity
- BT Investment Wrap
- BT Super Wrap
- BT Panorama
- Colonial First Wrap -Super/pension
- Centric IDPS
- Centric Super
- Hub24
- IOOF Portfolio Service
- IOOF Core
- IOOF Pursuit Select
- IOOF Grow Wrap
- Macquarie Wrap
- MLC Wrap/Navigator
- Mason Stevens
- Netwealth
- OneVue
- Praemium
- uXchange
- Wealthtrac
FEATURES
- APIR CODE PER0270AU
- REDEMPTION PRICENZ$ 1.792
-
FEES *
Management Fee: 1.3340%
Performance Fee: 20.5% of the performance above the benchmark - FUM AT MONTH END NZ$ 589.62m
- STRATEGY INCEPTION DATE 1 November 2004
- BenchmarkS&P/ASX Small Ordinaries Accumulation Index
Fund Managers
Ed Prendergast
Senior Fund Manager
Steve Black
Senior Fund Manager
Description
The Pengana Emerging Companies Fund combines the skills of highly experienced small company investors (collectively over 45 years’ experience) with a limited fund size and an objective of providing above market returns over the medium term. Our benchmark is the S&P/ASX Small Ordinaries Accumulation Index. The fund managers Steve Black and Ed Prendergast are part owners of the business and investors in the Fund, providing a strong incentive to perform. The Fund has strong research ratings from all major research houses and over the period since its inception has delivered returns well above benchmark.
EXPLORE OUR FUNDS
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. No allowance has been made for buy/sell spreads. 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. Where performance figures relate specifically to the Fund or comparative index, performance is calculated in NZD. Any other market performance or macro commentary refers to AUD.
2. Inception 1 July 2004. Investments performance has been calculated using AUD returns.
3. Annualised standard deviation since inception.
4. Relative to S&P/ASX Small Ordinaries Accumulation Index
* For further information regarding fees please see the PDS available on our website.
** The Fund does not invest in resource stocks.
COMMENTARY
Following a global crash in March, share markets bounced rapidly in April in response to stimulus packages announced to offset the likely effect of the coronavirus. The US market rose 12.7%, which is the largest one month move in over 30 years. The Federal Reserve stepped into credit markets, buying yield instruments in unprecedented volumes. Daily purchases by the Fed were US$70bn, compared to monthly purchases in the GFC of US$120bn. This “whatever it takes” approach provided liquidity and confidence that a fully blown credit crisis was averted in the short term.
The US market finished April higher than it was in early October 2019. To think we are moving into the largest economic downturn in living history, and the market is largely flat, is somewhat perplexing.
We are pleased to show a strong return in April, however, are not surprised to have underperformed such a strong market. Such violent bounces are typically centred around the riskiest stocks, and our conservative approach will always result in a lower exposure to such investments.
This conservatism also served us well during the earlier phase of the GFC.
The potential economic outcomes over the coming 12-24 months remain highly unpredictable. Lockdown measures globally are being relaxed, which (barring further outbreaks) will result in a resurgence from the currently “frozen” economies. We do not expect this however to result in a simple V shaped economic recovery. Record job losses, business closures and bankruptcies will damage confidence for longer than the lockdowns persist.
On the flipside, interest rates are now much lower than a year ago, hence asset prices should remain reasonably well supported given the global search for income. This effect was amply demonstrated in 2019 where the US market rose 22% notwithstanding a trade war and slowing global economy.
Therefore we see scope for further volatility and poor economic data. However, companies with strong balance sheets and resilient revenues should remain well supported, while more cyclical stocks remain vulnerable. We are open to selective investments in cyclical stocks where the share prices reflect the very worst potential revenue outcomes. Right now, however, many cyclical stocks have bounced remarkably, resulting in valuations that seem to be ignoring an impending collapse in earnings. We also hold elevated levels of cash to give us the flexibility to invest in desperate capital raisings which are likely to continue in the short term.