Australian Small Companies – finding value from a diverse universe
- Stable team with consistent philosophy and process applied for over a decade
- Focus on quality companies with sustainable competitive advantage protects from downside risks
- Evaluation criteria emphasise sustainability and ESG
Divergence in returns provides opportunity for skilled investors to deliver high growth for clients
There is a large divergence of returns across the small companies’ universe, creating opportunity for skilled investors. By favouring companies with sustainable competitive advantages, strong financials and predictable earnings, we seek to deliver superior returns and minimise downside risks. Value is discovered through a bottom-up investment approach, with an emphasis on industry, financials, valuation and management. The team began working together in 2008. Their investment process is designed to deliver absolute returns through investment cycles.
Our investment approach is consistent and minimises downside risks
We aim to add value to clients through all market conditions. Critical to achieving this has been the development of an investment framework that ensures stocks are assessed in a consistent manner with respect to both returns and risk. It is our approach to risk management and focus on downside risk at the stock level that differentiates our investment approach. Our experience managing downside risk can help us to outperform a volatile market segment.
We minimise volatility through disciplined portfolio construction and awareness of risk
A commitment to risk management is one of the tenets of our investment process. The aim of portfolio construction is to align the risk/return profile of a stock and the recommendation from an analyst with an appropriate active position in our portfolios. The tiering system was developed to deliver this alignment in a risk-aware, disciplined manner.
Our corporate RI strategy is based upon three strategic pillars of quality, stewardship and engagement.
We consider ESG risks to be factors that may place business value at risk. Companies at risk are identified using both external providers and our own internally driven research, which is based on a systematic and extensive company meeting program. Company meetings provide us with the opportunity to engage on ESG issues and gain greater insight into potential risks and opportunities. It also provides us with the opportunity to positively influence companies towards ESG best practice where appropriate.
Performance and Documents
Source: First Sentier Investors 2019
Performance returns are calculated gross of management fees and net of transaction costs. Performance returns for periods greater than one year are annualised. Past performance is not a reliable indicator of future performance.
Our investment team have over a decade together covering the broad small stock universe
Our team collectively has more than 40 years of investment experience, with 10 of those years working together. We have a deep understanding of small caps investing and an extensive network of industry contacts. This experience is particularly important in covering the broad small stock universe that has over 200 companies (if we include stocks that are not in the index).
All three Small Companies team members have a dual portfolio manager/analyst role, with Senior Portfolio Manager Dawn Kanelleas being supported by two Portfolio Managers. In practice, all members of the team understand the key reasons for investing in every stock and are aware of stock specific catalysts for share price movement.