The performance of Australian small caps has lagged behind the ASX100 over the last decade leaving many investors questioning whether an allocation to Australian small caps is worthwhile. Our argument is that with the right manager, an allocation to Australian small caps can potentially add value by generating active returns beyond the index and provide diversification within an Australian equity portfolio.
An active manager can realise the true potential of small caps, looking beyond their size and market inefficiencies to identify opportunities in an aim to generate risk adjusted excess returns. Indeed, our Realindex Small Cap Value strategy has outperformed its own, large and broad cap benchmarks over the past decade.
Our latest Realinsights uncovers why Australian small caps is still worth investing in by examining:
- The diversification benefits
- Size and skew when compared to global peers
- Sector weight and performance comparisons between Australian small and large caps
- Profitability and valuations
- Market inefficiencies that offer opportunities to make gains
This material has been prepared and issued by First Sentier Investors (Australia) IM Ltd (ABN 89114 194 311, AFSL 289017) (FSI AIM, Realindex), which forms part of First Sentier Investors, a global asset management business. First Sentier Investors is ultimately owned by Mitsubishi UFJ Financial Group, Inc (MUFG), a global financial group. A copy of the Financial Services Guide for FSI AIM is available from First Sentier Investors on its website.
This material is directed at persons who are 'wholesale clients' (as defined under the Corporations Act 2001 (Cth) (Corporations Act)) and has not been prepared for and is not intended for persons who are 'retail clients' (as defined under the Corporations Act). This material contains general information only. It is not intended to provide you with financial product advice and does not take into account your objectives, financial situation or needs. Before making an investment decision you should consider, with a financial advisor, whether this information is appropriate in light of your investment needs, objectives and financial situation.
Any opinions expressed in this material are the opinions of the individual author at the time of publication only and are subject to change without notice. Such opinions: (i) are not a recommendation to hold, purchase or sell a particular financial product; (ii) may not include all of the information needed to make an investment decision in relation to such a financial product; and (iii) may substantially differ from other individual authors within First Sentier Investors.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change. No part of this material may be reproduced or transmitted in any form or by any means without the prior written consent of Realindex.
Any performance information has been calculated using exit prices after taking into account all ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance.
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