For nearly a decade, Lazard Asset Management has applied its bottom-up stock picking approach to the international small cap universe.
The strength in global small cap stocks over the past four years, according to Lazard Asset Management’s portfolio manager and analyst Brian Pessin, has extended into 2007 with the MSCI World Small Cap Index, gaining 2.6 per cent in Australian dollar terms in the first quarter.
Pessin said the excellent run enjoyed by global small cap stocks since 2003 partly reflects robust global economic growth during this period, since small cap stocks perform well in the growth stage of the economic cycle.
“Small cap stocks have also been underpinned by vigorous M&A activity and, from a technical viewpoint, a greater awareness of small cap stocks on the part of the investment community,” he said.
Pessin said as the fund is managed by an experienced investment team, the Lazard Global Small Cap Fund has shown the ability to outperform in numerous market environments, including the recent strong small cap cycle.
“By applying our disciplined approach to the global small cap universe consistently over time, the fund has outperformed the MSCI World Small Cap Index on an annualised basis over one, three and five years and since inception.”
However, Pessin said most of the group’s time is spent on fundamental analysis of existing and potential holdings, where contact with management — whether of the holding or of its competitors, suppliers, or customers — is crucial.
“The fund is managed in a relatively concentrated manner, so that every investment counts and stock selection will be the ultimate determination of the fund’s success. The fund is managed by five passionate investment professionals dedicated to the small cap space. It leverages Lazard’s substantial resources, including a global research platform with analysts located around the world and organised by industry, as well as other Lazard portfolio teams with their own dedicated investment resources that have overlapping mandates.”
The runners up in the International Shares (Small Cap) category are AXA Rosenberg, Wellington and DFA Australia.
AXA Rosenberg offers a global small cap ex Australia fund that is an Australian domiciled unit trust.
“Our investment process is best described as an ‘expert system’,” Douglas Burton, the fund manager’s managing director for Australia/New Zealand said.
“The expert system is designed to capture the logic an expert would use to analyse a company in a detailed, comprehensive, and tireless manner without the emotion that is intrinsic to a human analyst.”
