4/30/2022 12:00:00 AM

Fund Reviews: Australasian Growth

Written by Michael Goltsman, Portfolio Manager 

Australasian Growth Fund

The Australasian Growth Fund returned -5.6% for the month, bringing it to a 12-month return of -19.1%, and 13.8% annualised since inception. 

Markets sold off again in April, led by growth and quality names. We felt the impact mostly in our technology and consumer holdings while our industrial positions held up during the month. We were pleased with several of our core holdings – notably Macquarie Telecom, Probiotec and Clearview Wealth were all positive contributors to performance this month. Life 360 was our biggest detractor this month. 

We have previously written about Life 360, which remains a core technology holding within the portfolio. The company reported a strong quarterly result with underlying revenue growing 64% in 1Q22. Driving this was a raft of positive operating business metrics, including 36% growth in users to 38 million globally, 42% growth in the number of paying circles and 15% growth in average revenue per user. However, the market clearly remains sceptical of cash burners in the context of a rising rate environment and Life 360’s headline operating cash burn (which was inflated by one-off items) took the market’s attention.

While this month’s sell-off is a detractor we view it as a short-term setback and see significant opportunity for outperformance when the tide returns to growth stocks. We continue to like Life 360’s long-term prospects driven by the increasing appeal of its subscriptions to a wider audience, the platforms expansion into new markets outside the US, and scope for further growth in average revenue per user. Further, given its growth momentum and fast marketing payback periods we view its $98m cash balance as being sufficient before the company reaches a consistent cash flow positive state by 4Q23.  

We continue to trade through a period of heightened market volatility. While this creates times of short-term pain, it also presents us with new investment opportunities which we expect will drive our future performance. Our cash levels remain high at 13%, allowing us to seize these opportunities. Reflecting this, we have made several new investments recently which we look forward to sharing with you in coming months. 





Written by Mike Ross, Portfolio Manager

Australasian Dividend Growth Fund

The Dividend Growth Fund returned -1.0% in April and has returned 9.4% over the last 12 months. The fund has returned 17.8% p.a. since inception.

Fleet management and leasing company Eclipx returned 11% during the month, rallying ahead of a strong interim result released in early May. Eclipx is benefiting from an exceptionally strong second-hand car market as supply chain issues have limited new car deliveries. While higher vehicle disposal profits are temporary, the balance sheet is now in a net cash position and the company has extended its share buyback program. The outlook for core recurring earnings is improving, with strong customer demand and market share gains accelerating new business writings. 

Key detractors during the month included MA Financial and EML Payments.

EML fell 48% after a poor 3Q trading update and earnings downgrade. EML’s GPR segment slowed during the quarter and the company has moderated new program launches due to the ongoing remediation process with the CBI. A more uncertain outlook for growth and concerns around quality of earnings and cash flow led us to exit the position during the month. 

MA Financial dropped 16% during April. The company reiterated its guidance for 10-20% growth in earnings-per-share at its AGM in early May. 

Market volatility has continued in early May. With 10% cash and our largest position subject to a takeover, the fund is in a strong position to capitalise.




Written by Mark Devcich, Portfolio Manager

Australasian Emerging Companies Fund

The Australasian Emerging Companies Fund returned -2.0% for the month, bringing it to a 12-month return of 0.7%, and 20.9% annualised since inception. 

April was another tough month, with the fund falling 2%. The Australian Emerging Companies Index fell 3.0%. Commodity stocks held up the index as the small resource index increased 0.1%. The fund also benefited from a 10% short position on the S&P500 for most of April.

Having attended a conference in Sydney in early May and met with a wide range of companies, it appears companies are struggling with higher wage costs and inflation. Going by the bustling nature of the city centre, restaurants, and hotels, consumer demand seems resilient due to excess savings and, more recently, a build-up of consumer credit. I believe we will begin to see a softening spending environment for both consumers and corporates later in the year as higher costs and interest rates start to bite.

The most significant positive contributor was Calix, which increased 18.4% on no new information.

The information technology sector was down 12.5%, impacting our holdings in RPMGlobal, Bigtincan and Frontier Digital Ventures.

There have also been several profit downgrades across the industry. Although the Emerging Companies Fund had managed to avoid these in April, we suffered a downgrade by Atomos (AMS: ASX) and Aussie Broadband (ABB: ASX) in early May. ABB, we had largely exited our position; however, AMS has cost us as we failed to recognise the deterioration in the business post the management changes last year. We are being selective in our buying right now and taking a more aggressive approach to cutting stocks where we feel there could be even slight downside risk to earnings given the savage share price reactions to these events, which will mean a build-up in cash levels.

Thank you for entrusting your capital to us.




Written by Mark Devcich, Portfolio Manager

Australasian Growth 2 Fund

The Australasian Growth 2 Fund returned -13.1% for the month, bringing it to a 12-month return of -28.8%, and 12.8% annualised since inception.

The fund had a tough month, giving up all the gains from the month before. Although the ASX IT sector was down 12.5%, similar to the US Nasdaq index, which dragged down many stocks in the portfolio, there were also negative trading updates from EML Payments (EML: ASX) and Megaport (MP1: ASX), which were the biggest drags to performance. The fund also benefited from a 10% short position on the S&P500 for most of April.

We reduced both these stocks on the day of the updates. Although both stocks had corrected meaningfully before their third quarter updates, this didn’t protect the share-price falling. EML’s deterioration in cash generation was severe and was why the stock fell much more than the profit downgrade, which was only 10%.

MP1’s update highlighted a slowdown in their annualised recurring revenue added. When a company is trading at a high multiple, there is little room for slowdowns. Although the long-term investment case remains intact, and MP1 has a dominant market position in a fast growing market, it may take some time before the reseller channel is effective in ramping up the sales of their SD-Wan product. 

On the positive front, Aroa Biosurgery upgraded its full-year revenue of NZ$37.7 million on a constant currency basis and exceeded guidance of NZ$34-37 million. The stock increased 14.8%. This NZ-based company is poised to benefit from a return to elective surgeries and a ramp-up in their sales team. There is a long-run way of adoption to come both from increased penetration of its existing customers and winning new clients. Their products are proving to be cheaper and more effective in reducing patient reoccurrence rates than the competitive products in the market.

Corporate Travel Management also increased 10.5% as investors became more comfortable with the outlook for corporate travel returning during this year.

Growth 2 is a fund focused on high growth companies. While we know that this strategy will at times underperform, we also know from the past that it can perform spectacularly well. We remain committed to being growth investors and wait patiently for the time to fully deploy the fund surplus cash (which is over 20%, if we include UWL currently under takeover).

Thank you for entrusting your capital to us.



Information is current as at 30 April 2022. Pie Funds Management Limited is the manager of the funds in the Pie Funds Management Scheme. Any advice is given by Pie Funds Management Limited and is general only. Our advice relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees, like brokerage, if you act on any advice. As manager of the Pie Funds Management Scheme investment funds, we receive fees determined by your balance and we benefit financially if you invest in our products. We manage this conflict of interest via an internal compliance framework designed to help us meet our duties to you. For information about how we can help you, our duties and complaint process and how disputes can be resolved, or to see our product disclosure statement, please visit www.piefunds.co.nz. Please let us know if you would like a hard copy of this disclosure information. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary.