BetaShares launches small cap fund
BetaShares has launched the Australian Small Companies Select Fund (SMLL), which is expected to provide investors with the income from a portfolio of profitable Australian small companies and which will aim to outperform the S&P/ASX Small ordinaries benchmark.
The new managed fund had been designed to identify companies with positive earnings and a strong ability to services debt and its stock selection process would include the evaluation of the relative valuation metrics and price momentum, according to BetaShares.
Additionally, SMLL would typically hold between 50 and 100 ASX-stocks, which would remain outside the 100 largest companies but would generally be within 350 largest companies by market capitalisation.
The company said that SMLL would cost 0.39 per cent per annum, not including performance fees.
BetaShares’ managing director, Alex Vynokur stressed that prior to SMLL, investors seeking higher exposure to small-cap stocks through passive vehicles had been poorly services as these indices had historically not provided extra return for the added risk.
“At the same time, traditional actively managed offerings come with a significant price tag, which can materially diminish returns to investors,” he said.
“As the S&P/ASX Small Ordinaries Index contains many unprofitable, speculative and illiquid stocks, which tend to perform poorly over time and cause a drag on index returns, Australian small caps is one of the few sectors where most active managers have been able to deliver alpha over the long-term.
“SMLL applies a rigorous investment approach that removes this design problem from the equation. With SMLL, investors can now access the growth potential of the dynamic small cap sector without paying high active management fees.”
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