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IMPQ May Monthly Report & Update

IMPQ Monthly Report
  • IMPQ finished the month up 6.8% net of fees, underperforming a very strong benchmark return by 3.8%.
  • Since the Fund’s inception in May 2019, IMPQ has delivered a 1.9% return net of fees, outperforming the benchmark by 6.0% during that time.
  • Negative contributors this month included Next Science (-19.8%), Limeade (-6.7%), Bendigo Bank (-6.0%) and Genetic Signatures (-4.0%).
  • Positive contributors this month included Kathmandu (+32.7%), Carbon Revolution (+25.2%), City Chic Collective (+23.9%) and Imricor (+20.0%).

 

Performance
Month (%)Quarter (%)FYTD (%)1 Year (% p.a.)Since Inception* (%)
eInvest Future Impact Small Caps Fund6.8-3.80.83.41.9
S&P/ASX Small Ordinaries Index10.6-1.9-3.8-2.9-4.0
Added value (detracted)-3.8-1.94.66.36.0

^Inception date was 23 May 2019. IMPQ returns are calculated using net asset value per unit at the start and end of the specified period and do not reflect the brokerage or the bid ask spread that investors incur when buying and selling units on the ASX. Past performance is not a reliable indicator of future performance.

Monthly Highlights

Janison Education has developed an online examination platform which replaces traditional pen and paper exams.  While this reduces paper use, it also has a number of other advantages including being able to adapt question difficulty to take into account the ability of the student to better ascertain student proficiency.

The COVID-19 pandemic has presented a number of opportunities for Janison – we have mentioned several of these in previous monthly commentaries. During May, Janisonmade a number of announcements in relation regarding new contracts.  Firstly, it announced that it had been selected to be the technology provider for the Cambridge Assessment and NSW Department of Education project to transition NSW selective schools’ placement tests to digital from 2021.  Janison also announced that it had entered into an agreement to acquire the Educational Assessments division of UNSW Global.  This business runs the ICAS exams that are popular extra-curricular school exams in 15 countries in subject areas such as maths and science.

Janison then announced that it has been selected to provide the technology and services to deliver exams online for distance learning students of the University of London.

These opportunities will provide excellent reference sites for Janison to pursue other opportunities globally.

Fund Review

IMPQ finished the month up 6.8% net of fees, underperforming a very strong benchmark return by 3.8%.

Since the Fund’s inception in May 2019, IMPQ has delivered a 1.9% return net of fees, outperforming the benchmark by 6.0% during that time.

The fund underperformance during May was not the result of significant stock price falls, but rather many of the Fund’s stocks being up in a low-mid single digit range and not keeping up with benchmark return of 10.6%.

Negative contributors this month included Next Science (-19.8%), Limeade (-6.7%), Bendigo Bank (-6.0%) and Genetic Signatures (-4.0%).

Positive contributors this month included Kathmandu (+32.7%), Carbon Revolution (+25.2%), City Chic Collective (+23.9%) and Imricor (+20.0%).  Each of these made announcements in relation to the COVID-19 impacts on their business.

Next Science (-19.8%) was impacted by an AGM update which suggested that US Federal Drug Administration approvals of its products may be delayed by COVID-19 and that product sales to hospitals were also being impacted by the lockdown in the US.  Bendigo Bank (-6.0%) announced a significant provision in relation to potential losses associated with the COVID-19 economic slowdown.  At the time of writing it appears that the COVID-19 lockdown is likely to be shorter than initially expected.

Kathmandu (+32.7%) announced that it was re-opening stores in Australia and New Zealand earlier than expected and that global online sales had increased by 2.5-3 times during the shutdown.

Carbon Revolution (+25.2%) announced that the company’s customers were reopening factories in Europe and the US post COVID-19.  City Chic (+23.9%) announced that it was reopening stores in Australia and that it had traded profitably during the COVID-19 shutdown due to strong growth in the company’s significant online operations in both Australia and the US.

Imricor (+20.0%) announced that it had signed a master purchasing agreement with the largest hospital Group Purchasing Organisation in Germany and that it is expecting restrictions to be relaxed in the key German market which will allow it to both market the product more extensively and allow Imricor personnel to implement the system for new clients.

During the month we used the market strength to exit a number of holdings including Ooh!Media and Ingenia Communities.  We also reduced our holdings in Orora and Mesoblast.  We used the proceeds to increase our holdings in a number of Sustainable Future Enabler stocks including Envirosuite, Fluence, Imricor, Janison and PhoslockEnvironmental Technologies. At month end the Fund held 43 stocks and cash was 8.4%.

For May, the weighted average Perennial-derived Environmental, Social, Governance and Engagement (“ESGE”) Score of the Fund was 7.1 which is 27% higher than the benchmark ESGE Score of 5.6.

Activity

ESG-related engagement increased during the month due to December year end annual general meeting season and as companies became more outward looking due to the gradual easing of COVID-19 restrictions:

  • Imricor – we engaged with the company in relation to the targets for the long term incentive plan and we encouraged the company to increase the number of female directors on the Board.  The company undertook to further consider these issues with a view to improving over the course of the next 12 months.
  • Vista Group – we engaged with the company in relation to the independence of the board and gender diversity.  We voted against the election of one of the directors as we raised similar issues last year and the company appears to have made limited progress.
  • Kathmandu – we engaged with the company in relation the management of impacts from COVID-19 on the company’s supply chain.  As mentioned above, the company announced that it is reopening stores and has had strong online sales.  Accordingly, it is not expecting any cancellations of orders with suppliers with perhaps some short term deferrals being required to manage inventory positions.
  • Phoslock Environmental Technologies – we engaged with the company in relation to improving targets in the long term incentive scheme and improving gender diversity at both board and executive level.
  • Fluence – we engaged with the company in relation to remuneration levels, the independence of the board given a number of directors have past affiliations with the company and gender diversity at board level.  The company is seeking to appoint a female director and we have provided input the company in relation to potential candidates.

This is analysis done on the Sustainable Future Trust portfolio as at Feb 2020 by the Sustainable Platform

To read more about eInvest Future Impact Small Caps Fund (Managed Fund) ASX: IMPQ, click here.

Interested in purchasing units in the fund? Contact your financial adviser or simply purchase via your online broker, and as always read the PDS for more information. This can be found here. 

Past performance is not a reliable indicator of future performance. Please read the PDS prior to investing. This information is general in nature and is subject to the terms and conditions outlined here.