Active small cap managers could outsmart rocky markets
While last year’s shaky fourth quarter saw small cap stocks suffer, an active strategy could help these assets hold their worth in tough markets, according to Zenith head of equities, Quan Nguyen.
While the S&P/ASX 300 Index fell 8.4 per cent, the S&P/ASX Small Ordinaries Index fell 13.7 per cent, and according to the firm, it's no surprise given small companies display higher beta relative to their larger counterparts.
Nguyen said despite smaller companies exhibiting higher market sensitivity, exposure to the asset class could be gained without these higher levels when active management is employed.
He said, over the long-term, the firm’s rated active smaller companies funds exhibited market sensitivity levels that were either lower of similar to the broader markets due to the benefits of drawdown protection and the impact it has on recovery of an investor’s capital balance.
Zenith’s smaller companies funds even managed to recover from drawdowns faster than the broader small cap market during the GFC, with the average recovery duration being 25 months.
“In general, smaller companies managers have participated fully in market upswings whilst also providing significant downside protection,” he said. “We believe this highlights the benefits of active management, especially in less efficient segments of the market”.
Recommended for you
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
