Active small cap managers could outsmart rocky markets
While last year’s shaky fourth quarter saw small cap stocks suffer, an active strategy could help these assets hold their worth in tough markets, according to Zenith head of equities, Quan Nguyen.
While the S&P/ASX 300 Index fell 8.4 per cent, the S&P/ASX Small Ordinaries Index fell 13.7 per cent, and according to the firm, it's no surprise given small companies display higher beta relative to their larger counterparts.
Nguyen said despite smaller companies exhibiting higher market sensitivity, exposure to the asset class could be gained without these higher levels when active management is employed.
He said, over the long-term, the firm’s rated active smaller companies funds exhibited market sensitivity levels that were either lower of similar to the broader markets due to the benefits of drawdown protection and the impact it has on recovery of an investor’s capital balance.
Zenith’s smaller companies funds even managed to recover from drawdowns faster than the broader small cap market during the GFC, with the average recovery duration being 25 months.
“In general, smaller companies managers have participated fully in market upswings whilst also providing significant downside protection,” he said. “We believe this highlights the benefits of active management, especially in less efficient segments of the market”.
Recommended for you
Financial advisers will have access to private equity investments run by WTW for the first time as it launches a pooled fund to provide savers with access to traditionally institutional assets.
Three solutions providers – Betashares, Franklin Templeton and Russell Investments – have all launched new ETF products, including one range which uses gearing to help build wealth.
Platinum Asset Management chief executive, Jeff Peters, has shared a progress update on its newly announced turnaround strategy.
There is a role for advisers using inflation-linked bonds in portfolios, according to AXA IM, as the possibility of higher inflation necessitating another US rate hike is not out of consideration.
