In partnership with US-based asset manager EAM Global Investors, SG Hiscock (SGH) has launched the EAM Global Small Companies Fund into the Australian market.
The exclusive strategy was first announced in late August, when EAM joined SGH’s partnership program which commenced in June 2020.
The fund will be distributed by SGH and offers Australian investors access to global small companies across both developed and emerging markets to increase portfolio diversification.
The listed universe of global small companies represents approximately 11,000 stocks, or 88 per cent of all publicly listed companies. It is also seven times larger than its mid- and large-cap peers combined by number of constituents, providing strong opportunities for investors.
Travis Prentice, EAM’s chief executive, explained that the Australian market will follow the systematic investment approach used by the firm in the US.
“We use our own proprietary approach called Informed Momentum, whereby our investment team invests in companies with positive momentum, but we also add rationale and risk management overlays to deliver alpha for clients,” he said.
With the size and dynamics of the small caps universe making it difficult for an individual investor to research every stock, the investment process identifies and capitalises on the right opportunities for them.
“Historical data over the last 30 years shows the cumulative performance of the momentum factor outperforms that of value, quality and growth factors over time.
“Additionally, over the same period, momentum wins on a risk-adjusted basis, suggesting that an investor with the added tailwind of momentum exposure may prove beneficial over time,” Prentice continued.
The fund holds between 100 to 150 companies and does not use pre-set sector or country weightings.
This allows the portfolio manager to follow the momentum factor within the risk management parameters of the fund.
Anthony Cochran, SGH’s head of distribution, said local advisers are demonstrating strong interest for a global small cap manager with this type of investment philosophy.
“EAM is entering the market at a time when advisers are looking for innovative investment products that have a proven track record of delivering returns.
“Our initial discussions with advisory groups have been overwhelmingly positive, and we anticipate strong demand for the strategy in Australia,” he commented.
In addition to EAM, SGH’s partnership program also includes Morgan Stanley Investment Management Australia, LaSalle Investment Management Securities and abrdn.
