Pengana chief investment officer Rhett Kessler has described the market downturn as the ‘toughest period’ in his 30-year career as he tried to put cash to work at the bottom of the market.
Despite having worked through turbulent periods in the past, he described this year’s downturn as being “exceptionally tough”.
Kessler worked as an analyst at UBS Australia and head of research and fund manager at IAG Asset Management before joining Pengana in 2007.
In a webcast, the Pengana Australian Equities fund manager described what he called ‘vomit buying’ as he put the fund’s 20% weighting to work.
“We put $110 million of cash into shares at attractive prices, it was fantastic but it was the toughest period in my 30 years in the industry.
“I call it ‘vomit-buying’, I would buy something and then walk around and try not to throw up and then buy some more and I did that consistently, I was exhausted as it was an exceptionally tough environment.
“We have to be able to act when the opportunity presents itself. The fact we went from our highest-ever cash weighting to lowest cash weighting in a month speaks to our discipline.”
The cash weighting in the fund went from 20% in early 2020 to 12% in March and 10% in June but had now risen slightly to 14% in September.
This was put to work in purchases such as Rio Tinto, additions to Telstra and Aristocrat and then participating in the capital raisings of Auckland Airport, NAB and Flight Centre.
Meanwhile, the fund sold its stake in Westpac bank, the most-sold share in September, and in JB Hi-Fi which it described as a “superb business”. The stock has soared as a result of increased consumer spending during the pandemic with shares up 30% since the start of the year.
“We had held the stock for a long time as we think it is the best retailer in Australia and the management team is superb. Its purchasing power during the pandemic has been fantastic and we feel the business will survive and thrive.
“But it just got too expensive. We would love to own it but we have to exhibit discipline and move on.”
According to FE Analytics, within the Australian Core Strategies universe, the Pengana Australian Equities fund lost 7.5% over one year to 30 September, 2020, in line with losses by the Australian equity sector.
