Micro-cap strategies on rise
The launch of a number of new micro-cap strategies by existing small-cap Australian equities managers emerged as a ‘surprising theme’ of 2017, according to Morningstar’s Sector Wrap-Up report.
The study found that these launches were driven by the following factors:
- capacity being reached in the managers’ existing small-cap strategies
- the benefits to managers of the high micro-cap fees
- potential synergies between micro-cap and small cap strategies
Also, according to the Morningstar Sustainability Ratings, a growing number of Australian equity fund managers were committed to incorporate environmental, social and governance (ESG) issues into their investment analysis.
The study, which conducted qualitative research assessments on 90 Australian large-cap equities strategies and 32 Australian small-cap strategies in 2017, found that over 80 per cent of ethical funds, sustainable funds and strategies which had an ESG mandate as at the end of 2017 scored average or above.
Another trend identified through the report was that 80 per cent from 75 active Australian equities large-cap strategies increased their active share, against the S&P/ASX 200, between 2014 and 2017.
“We believe the primary reasons for the increase in active share is a reaction to the continued rise in popularity of inexpensive passively managed strategies and bullish market conditions,” the report said.
Morningstar also allocated six Australian share strategies the highest-possible analyst rating of gold which included the Following:
- BT Core Australian Share,
- BT Smaller Companies
- Fidelity Australian Equities
- Greencape Wholesale Broadcap
- Greencape Wholesale High Conviction
- Schroder Australian Equity
Another 26 strategies were designated silver and a further 48 bronze ratings and, at the same time, nine unlisted funds achieved ratings upgrades, Morningstar said.
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