Pender Growth Fund Provides Financial Highlights and Company Updates

Pender Growth Fund reported a net loss of $6.79 million, or $0.95 per share, for the quarter ending March 31, 2025, a reversal from the $12.26 million net income reported in the same period last year, driven by negative investment performance amid mixed equity market performance and concerns over the Trump administration's policies. Despite the quarterly loss, the company repurchased shares under its Normal Course Issuer Bid, and management believes the fund is well-positioned to pursue investment objectives, citing attractive valuations in North American micro and small-cap stocks.

Analysis

Pender Growth Fund Inc. reported a significant shift in financial performance for Q1 2025, posting a net loss of $6.79 million, or $0.95 per share, a stark contrast to the $12.26 million net income ($1.67 per share) recorded in Q1 2024, primarily attributed to negative investment performance. This downturn led to a reduction in total shareholders' equity by $7.11 million to $115.97 million, with shareholders' equity per share declining to $16.33 from $17.25 at year-end 2024, despite $325,816 being used for share repurchases. The fund's investment portfolio at quarter-end comprised 59.6% public equities and 40.4% private companies, with net assets allocated 54.6% to public companies, 37.0% to private unlisted companies, and 8.4% to cash. The reported loss occurred amidst a mixed market environment where Canadian large-cap equities (S&P/TSX Composite +1.5%) saw modest gains, while US markets, particularly small caps (Russell 2000 CAD -9.4%), declined significantly, influenced by investor concerns over potential US policy shifts and divergent central bank actions, with the Federal Reserve holding rates while the Bank of Canada cut its benchmark rate to 2.75%. Despite the quarterly -5.4% return on Class C shares, the fund showed a 46.3% return over one year. Management actively repurchased 31,800 shares, renewed its Normal Course Issuer Bid, and noted a decrease in the Management Expense Ratio (MER) before performance fees to 2.44%, expressing continued optimism about finding attractive valuations in North American micro and small-cap stocks through a bottom-up fundamental research approach.

Key Decisions for Investors

• Investors should weigh the Q1 2025 net loss of $0.95 per share and the -5.4% quarterly return against the fund's robust 46.3% one-year performance and management's continued share repurchases, which signal a belief in the shares' undervaluation.
• Monitor the fund's performance closely given the challenging macroeconomic backdrop, including heightened uncertainty from potential US policy shifts and the contrasting monetary policies of the Federal Reserve and Bank of Canada, which could significantly impact its North American small-cap and private equity holdings.
• Assess if the fund's specialization in small-cap, special situations, and illiquid investments, primarily in the technology sector, aligns with their risk tolerance and long-term investment horizon, acknowledging the potential for higher volatility inherent in such strategies.