Can global SMID funds compete with Aussie counterparts?
As Fidelity launches a global version of its mid and small-cap Future Leaders fund, has it been better to be invested in Australian or global ones in recent years?
The firm said the attraction of launching a global version would expand the investment universe and identify global small and mid-cap companies at an early investment stage.
Looking at data from FE Analytics, it was a clear victory for the Australian small and mid-cap sector over both long and short-term time periods.
The biggest difference was seen over a five-year time horizon with the Australian sector returning almost double the returns by the global sector. Over five years to 31 August, 2020, the Australian sector returned 73% while the global counterpart returned just 39%.
Over shorter time-periods, the Australian sector had also outperformed over both one and three years as well with returns of 7.8% over one year to 31 August and 32% over three years. The global sector achieved less than this with returns of 4.9% over one year and 25% over three years.
Performance of Australian small and mid-cap sector versus global small and mid-caps over five years to 31 August 2020
The best-performing fund in the Australian space over five years was Ophir Opportunities which had seen total returns of 170%. The concentrated small-cap fund was launched in 2012 and focused on high quality, emerging businesses which were exposed to structural growth opportunities.
“With a bias towards cash-generative businesses with sound balance sheets and highly capable management teams, the fund seeks to identify these opportunities early in a company’s life cycle, when it is typically under-researched and under-valued by the investment market,” the fund said.
Like Fidelity, Ophir launched a version of this fund last year, Ophir Global Opportunities.
As well as Ophir, there were 11 funds in the sector which had reported returns of over 100% over the five years which were SGH Emerging Companies, Macquarie Small Companies, Macquarie Australian Small Companies, OC Micro-Cap, Cromwell Phoenix Opportunities, Pendal Microcap Opportunities, Australian Ethical Emerging Companies, Ausbil MicroCap, Fidelity Future Leaders, Hyperion Small Growth Companies and VanEck Vectors S&P/ASX MidCap ETF.
In contrast, the highest performance in the global space came from Bell Global Emerging Companies which returned 60.9%, far less than in the Australian space.
Performance of best-performing Australian and global small and mid-cap funds over five years to 31 August 2020
AUTHOR
Laura Dew
Recommended for you
Infrastructure assets are well-positioned to hedge against global uncertainty and can enhance the diversification of traditional portfolios with their evergreen characteristics, an investment chief believes.
Volatility in US markets means currency is becoming a critical decision factor in Australian investors’ ETF selection this year.
Clime Investment Management is overhauling the selection process for its APLs, with managing director Michael Baragwanath describing the threat of a product failure affecting clients as “pure nightmare fuel”.
Global X will expand its ETF range of exchange-traded funds next month with a low-cost Australian equity product as it chases ambitions of becoming a top issuer of ETFs in Australia.
