Volatility renews interest in small caps: SGH
Small cap funds are seeing a resurgence of interest as volatility and uncertainty hamper earnings growth of traditional staples, SGH ICE fund portfolio manager, Callum Burns believes.
Burns said that with "low or no earnings growth in the large cap stocks" in recent times, advisers have been forced to look beyond the Australian Securities Exchange 100 (ASX100) for opportunities.
"There are more companies outside the top 100 with sustainable growth than there are inside it," he said.
"Over the 10 year that the (ICE) fund has been running, we have seen ebbs and flows in the popularity of small caps.
"But with growth in the large end of the market volatile and uncertain, there has been a renewed interest in small caps.
"There are definitely opportunities outside the ASX100 and there is no question that small cap stocks have delivered some good returns to investors in recent times.
"But those embracing small caps for the attractive opportunities they offer for greater returns, should also be mindful of the risks.
"The key for us to investing for sustainable growth is to look for good quality companies with a business franchise with a sustainable competitive advantage where it is difficult for clients to discontinue using the product or service.
"Companies displaying these characteristics are typically outside the top 100 and tend to deliver more certain earnings than those that don't."
AUTHOR
Nicholas O'Donoghue
Recommended for you
The former CEO and co-founder of Zenith Investment Partners has switched sides and moved in-house to take up an executive role at a listed fund manager.
The “experiment” away from vertical integration has been a mistake, according to Clime’s Michael Baragwanath, and Clime is positioning to benefit via advice and fund manager acquisitions.
JP Morgan Asset Management has identified Australia as an “emerging growth market” as it seeks to double its assets under management in the Asia-Pacific region in the next five years.
Australian Ethical funds under management were $14.3 billion at the end of September, with its investment division seeing inflows return after outflows in the previous quarter.
