Pengana underweight for US small companies
Pengana is underweight in US equities in its global small companies fund and is comfortable with either a Biden or Trump win, but believes that ex-US global equities present more growth in the near future.
Jonathan Moog, fund co-manager, said we were in a period where the US had outperformed pretty dramatically, similar to what we saw leading up to the 2000s dot-com crash.
“Now we could start seeing some pretty serious outperformance in the international space,” Moog said.
“We continue to be underweight in the US… and we’re pretty optimistic about the ex-US space right now.”
According to FE Analytics, within the Australian Core Strategies universe in the global small/mid cap sector, the Pengana global small companies fund had returned 7.05% over the last 12 months to 30 September, 2020, compared to the sector average of 5.22%
It was 10th best in the sector over that time period, while it was seventh best over six months with a return of 22.16% verse the sector average of 19.93%.
The fund’s largest regional concentration was in Europe (31.6%), but still held 26.9% in North America.
When it came to the US election, Moog said the fund was positioned well either way, but both scenarios had different outcomes.
“If I were to take a really general view and say what’s better for the market – Biden or Trump – I do think it may react negatively if Biden wins mostly because of tax reasons,” Moog said.
“It’s a negative tax connotation, not only for citizens but for corporates and I think that will have an adverse reaction in the stock market.”
The Democratic party candidate had promised to raise taxes, only for those earning over US$400,000 ($563,953), raising the corporate tax rate to 28%, and a 21% minimum tax on all foreign earnings from US companies.
“Our books are unintentionally pro-Biden… we have an allocation to cannabis and sports gaming in the US, both of which Biden has talked about legalising on a federal level,” Moog said.
“If you solve federal regulation of those business and those industries, I think you’d have pretty explosive value creation.
“I don’t think a Trump victory hurts us, but I think a Biden victory could really help a few stocks.”
Performance of the Pengana global small companies fund over one year to 30 September 2020
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