Pengana Axiom International Ethical Funds

The Pengana Axiom International Ethical Fund invests in companies that are dynamically growing and changing for the better, more rapidly than generally expected and where the positive changes are not yet reflected in expectations or valuation.

The Global Equity Strategy seeks dynamic growth by concentrating its investments in global developed markets, and may also invest in companies located in emerging markets.

The investment manager is Axiom Investors, a Connecticut-based global equity fund manager formed in 1998 with over US$ 19 billion in assets under Management.

For up-to-date fund statistics please find the latest monthly report here

Investment Approach

Axiom invests in companies that are:

• dynamically growing;
• changing for the better, more rapidly than generally expected;
• undervalued, such that the positive change is not yet reflected in the share price.

Axiom identifies forward looking positive changes, accelerations, and inflections in a business’s key operations, which it believes will lead to subsequent improvements in reported financial results or earnings projections over the next 12-36 months. Axiom believes that the most attractive companies will have positive fundamental changes occurring in their earnings growth, creating natural compounding performance tailwinds, and an attractive valuation providing both upside potential and risk control benefits.

Investment Process

Axiom has developed a repeatable and transparent 4 step investment process:

1. Idea generation
2. Fundamental Research
3. Portfolio Construction
4. Monitoring
   
   

Axiom does not use screens or quantitative tools at the start of the research process but rather focuses on collecting and assessing operational data in order to identify significant gaps between their research and consensus expectations. The investment thesis and the relevant supporting data is translated into a consistent risk and return rating for each security that incorporates about two dozen fundamental elements. This analysis includes:

• Macroeconomic analysis – to the extent that such factors may be impactful to underlying earnings. Macroeconomic considerations will not be the primary driver of a portfolio decision, but rather will serve as a headwind or tailwind to our bottom-up investment thesis.
• Environmental, Social and Governance (ESG) analysis – all relevant and material ESG considerations are systematically evaluated and expressed within Axiom's ratings worksheet which is prepared for every portfolio owned security. ESG has been incorporated since inception of the firm in 1998.
  
  

The portfolio management team constructs the portfolio from diversified sources of alpha, informed by the proprietary ratings framework which is applied to each security in the portfolio. The objective of the portfolio construction stage is to build high active share portfolios with high upside participation and downside protection.

Indicative Strategic Asset Allocation

The Fund's investment manager aims to manage the Fund within the following guidelines:

• Typically 45 to 75 holdings
• No more than 6%, or 1.5x the index, in a single position
• No more than 40% in a single sector (45% in IT)
• No more than 30% in a single country (0.5 to 1.5x the Index in the US)
• No more than 25% in emerging markets
  
  

The Fund can invest in securities that are not part of the Index.

Top Holdings can be viewed here

Latest Fund performance can be viewed here

Pengana is committed to responsible investing for the Fund and seeks to avoid investing in businesses that are, in its opinion, currently involved in activities that are unnecessarily harmful to people, animals or the environment. These activities include:

• Alcohol
• Adult content
• Animal cruelty
• Fossil fuels (coal, coal seam gas, oil)
• Gambling
• Genetically modified organisms (GMO)
• Human rights abuses and exploitation
• Mining
• Nuclear
• Old growth forest logging
• Securities from issuers on UN sanctions list
• Tobacco
• Uranium mining
• Weapons
  
  

The Fund utilises a negative screening process which seeks to avoid investment in companies that derive operating revenues from direct and material business involvement in these sectors.

Consideration of ESG issues raised by prospective and existing investments are investigated within the investment research process and integrated into the assessment of the investment’s return potential and risk. ESG analysis forms a part of the team’s holistic assessment of all key stock drivers as part of the investment philosophy and process, Labour standards are considered but not systematically taken into account in the selection, retention or realisation of investments.