Investing in the Standard & Poor’s/ASX Small Ordinaries Accumulation Index returned solid dividends for many investors last year, but you had to be in the right place at the right time, according to the latest Lonsec Small Cap Australian equities review.
The review analysis, released to Money Management, revealed the index gained a solid 13.1 per cent last year – significantly reversing the dramatic 53.2 per cent loss recorded in 2008 and consolidating on the 57.4 per cent gain recorded in 2009.
However the Lonsec analysis made clear that, on closer analysis, the performance of the industrials and resources components of the universe had painted a mixed story in circumstances where the S&P/ASX Small Industrials Accumulation Index returned a flat 2.2 per cent for the year, whereas the S&P/ASX Small Resources Accumulation Index returned a strong 30.7 per cent return for the year.
Lonsec said it had noted the average assessed small cap manager had been underweight in the resources sector, and a continuation of this trend was starting to make a negative impact in shorter term performance.
“The majority of small cap managers assessed by Lonsec have a ‘quality’ bias in their investment process, which is at times incompatible with small cap resource stocks where the company may not be generating cash-flow or earnings, or may be a higher risk single ‘mine style’ business,” Lonsec stated.
It said managers with large exposures to the resources sector, such as Macquarie and Equity Trustees, and Ausbil Dexia (in the microcap fund) were, “as expected, by far the strongest performing funds in 2010”.
The latest Lonsec review saw five funds rated as ‘highly recommended’, 22 funds as ‘recommended’ and nine as ‘investment grade’.
The funds to be granted Lonsec’s highest ‘highly recommended’ status were the Hyperion Small Growth Companies Fund, the Schroders Australian Smaller Companies Fund, the UBS Australian Small Companies Fund, the Ausbil Australian Emerging Leaders Fund, and the Pengana Emerging Companies Fund.
