The small-cap funds returning 100%
Five small-cap funds have returned more than 100% in the past year, despite markets seeing a reversal where small-caps are out of favour.
Earlier this week, FE Analytics data found the Australian large-cap sector, within the Australian Core Strategies universe, returned 4.4% compared to returns by the Australian small and mid-cap sector which returned 2.6%.
The pattern was a reversal of the trend seen in 2020 with the small-cap sector returning 16% over the year to 31 December, 2020 compared to returns of 3.9% by the Australian equity sector.
It also bucked a global trend where small caps were now outperforming large caps.
Nevertheless, there were five funds which returned over 100% over the year to 31 March, 2021. These were Forager Australian Shares (121%), SGH Emerging Companies (110%), Lennox Australian Microcap (109%), Microequities Pure Microcap Value (102%), Bennelong Emerging Companies (101%). The Australian small and mid-cap sector returned an average of 60.7% over the period.
The Bennelong Emerging Companies was one of the fund’s previously highlighted by Money Management after it was one of the few funds which emerged positive from last year’s market downturn.
Performance of five funds versus Australian small and mid-cap sector over one year to 31 March 2021
In the large-cap space, there were no funds that returned over 100% was the best performer was Sandon Capital Activist which returned 88% while the sector returned an average of 36%.
However, performance of the five funds was mixed during the first quarter of 2021 with the SGH Emerging Companies returning 9.2% but the Lennox Australian Microcap returning 1.3%.
In its latest report, Forager said performance had been helped by its holdings receiving takeover bids and seeing record sales volumes. However, it cautioned investors should not be expectant of 121% returns every year.
“We believe you should largely ignore the 125% return showing as the fund’s one-year number. Those dysfunctional markets are the starting point 12 months ago and we don’t think they are at all reflective of the underlying portfolio,” it said.
AUTHOR
Laura Dew
Recommended for you
Statutory NPAT at Pacific Current has almost halved in FY25 to $58.2 million as the result of an investment restructure.
Being able to provide certainty about redemptions is worth fund managers pursuing when targeting the retail market even if it means sacrificing returns, according to Federation Asset Management.
Regal chief investment officer Philip King will step down from listed investment company VGI Partners Global Investments after the LIC reported a loss of $17.6 million for FY25.
Real asset commentators have shared what advisers should be considering when conducting their due diligence on the assets and how they can mitigate illiquidity for retail clients.
