The Pengana Emerging Companies Fund posted a strong gain of +9.1% in April, outperforming the ASX200, which gained +5.54%.
The Fund, which invests exclusively in small cap stocks, benefited from the strong equity market rallies experienced worldwide since the beginning of March. Although it is not yet clear whether these rallies are bear market rallies or whether they signal the start of a broad economic recovery, small cap stocks have been outperforming larger stocks in recent weeks, which is a leading indicator of a recovery.
The manager noted that the strongest individual stock performances often came from the highest risk and lowest quality stocks, however as they remain committed to disciplined risk management of the Fund they were not able to capture the full upside of these returns. They also noted the small cap marketplace is significantly less crowded, after a large number of investors exited the sector after the events of last year. This has created opportunities for the Fund, which the manager will look to exploit.
The best individual stock positions included Bradken (up +93%), Thinksmart (up +50%) and CSV Group (up +35%). Negative positions included Ramsay Healthcare and Healthscope (both down -6%).
