Several Australian small-cap funds are listing in the Asia Pacific ex Japan sector and may have been ignored by investors who could be missing out on significant returns.
According to FE Analytics, there were four funds which invested in Australian small-cap equities sitting in the sector, within the Australian Core Strategies universe, as they also held exposure to stocks in New Zealand.
This included the Saville Emerging Companies fund which had returned 140% over the past six months. It sought companies which were in their early development phase or which were being mispriced. Stocks needed to sit outside the ASX 100 or NZX 20 and be less than $500 million at the time of investment.
Over the six months to 30 September, 2020, the fund, which was launched in 2017, returned 140% and it had returned 55% over one year to 30 September, 2020, according to FE Analytics. It was also the best-performing fund in the Asia Pacific ex Japan sector over both one year and six months.
Performance of Saville Emerging Companies versus sectors over the six months to 30 September 2020
The performance of the Saville fund also compared positively to its peers in the Australian small and mid-cap sector where the best-performing fund, Lennox Australian Microcap, returned 74%.
The fund was highly concentrated with 90% of the portfolio invested in 17 stocks and manager Jonathan Collett acknowledged the high returns recently were ‘unsustainable’.
“Almost our entire portfolio generated positive performance, however the most pleasing aspect was that the largest contributors were generally those stocks that either reported strong earnings results or made significant company announcements,” he said in the latest company report.
“Nonetheless, we acknowledge that these are unsustainably high monthly performance figures and that a return to more benign monthly returns is inevitable, if not imminent.”
The other three funds in the Asia Pacific ex Japan sector were the Ellerston Australian MicroCap fund, the Perennial eInvest Future Impact Small Caps fund and the Montgomery Small Companies fund.
Over six months, the Ellerston fund had returned 64%, the Montgomery fund had returned 45% and Perennial returned 32%.
These compared to average returns of 22% by the Asia Pacific ex Japan sector and 37% by the Australian small and mid-cap sector over the six-month period.
Performance of Ellerston, Perennial and Montgomery funds versus sectors over the six months to 30 September 2020
