Equities

The rise of passive investment makes tremendous sense, especially when the index being tracked is on the large cap side. Move down the index, however, and it can pay to have someone sorting out the winners from the losers.

Australian investors are looking past the allure of franking credits and moving towards more unbiased diversification, with ETFs providing a cheap, liquid and highly available access point.

With traditional equity managers losing the fight against passive product providers, diversification into more specialist classes of asset management may provide a more sustainable path. But that’s a pricey endeavour, and easier said than done.

The entrenched position of the banks and miners in the ASX 200 doesn’t necessarily correlate to inherent growth potential, especially with the issues both sectors face into. For investors, it may be worth considering an alternative path broad market exposure.

The small-cap space can be rife with risk, as emotion and understanding wrestle with common sense practice. But with a systematic style overlaid to provide flexibility, diversification and liquidity, the benefits become clear.

It’s one thing to acknowledge the immense computing power at our disposal, but it’s another for leading investment teams to figure out the best ways to shape that advantage into better investment outcomes.

Australian small cap managers are some of the most successful active managers in the world – and charge like it. But their apparently anomalous outcomes might have a relatively simple explanation, according to Invesco.

Being caught up in a constant thrum of market activity might be advantageous for some investment teams, Desmond explained, but isn’t necessarily for those with a high conviction style.

Despite a proliferation of providers entering what is an already crowded market, DNR Capital has managed to pull of an impressive run in the Australian Equities SMA space.

The prospect of riding the giddying, volatile rocket ship of tech stocks like Nvidia holds little interest for high conviction teams who back their proven investment strategies.

By employing smart active management, investors can avoid the ghoulish company cohorts that haunt the small cap sector of the stock exchange, Invesco writes in a recent whitepaper.

One sector consistently outperformed for half a decade, while the other took a much more volatile ride to supremacy, riding some almighty tailwinds along the way.