S&P releases equities micro cap peer group review

Standard & Poor's (S&P) Fund Services has released its Australian equities micro cap peer group review. The release is the second of three peer groups to be released as part of S&P's broader 2010 Australian equity small cap sector review.

S&P rated nine micro-cap investment strategies, affirming five of the ratings, upgrading one, assigning new ratings to two, while one strategy remained on hold. S&P identified four managers that it considered offered the strongest capabilities in the peer group, rating each as four stars. They were Australian Unity Acorn Capital Microcap Trust, Celeste Australian Smaller Companies Fund, Pengana Emerging Companies Fund and Perpetual Smaller Companies Fund.

All nine funds in the peer group exhibited a longer-term bias to stocks listed outside the S&P/ASX 300 Index, which defined them as micro-cap companies, S&P said. It added that depending on existing market conditions, shorter term tactical tilts may be made to more traditional small cap market stocks, which it defined as those securities that trade within the S&P/ASX 100-300 by market cap.

In addition, several companies listed outside the S&P/ASX 300 Index may have a market cap similar to those in the S&P/ASX Small Ordinaries Index; however, they were not incorporated into the index because they did not meet the index admission criteria.

Over one, three and five years to September 2010, the S&P Emerging Companies Index returned 4.8 per cent, -7.9 per cent and 7.4 per cent respectively, compared with 2 per cent, -6.6 per cent and 4.5 per cent per year for the S&P/ASX 100 Index.

S&P will release the small cap peer group over the next two weeks, followed by a sector report, which will include the key findings and sector themes from its review.