Home / ‘The market is efficient, but it has no imagination’ – Ausbil

‘The market is efficient, but it has no imagination’ – Ausbil

Global small-caps consistently outperform their large-cap brethren – and do it with a better risk-adjusted return – but few investors are paying attention, according to Ausbil portfolio manager Tobias Bucks.

“Global small-caps outperform global mid-and large caps. Like all maths, it’s boring but it’s true,”
Mr Bucks told the Inside Network’s Equities and Growth Symposium on Wednesday, adding that they are also untethered from the news cycle that can determine the fortunes of their large-cap counterparts.

“What drives the share price is about what the board and management is doing with its employees, its services, and its assets. It’s not about what the Fed is saying with its tapering. It’s not about what Trump is Tweeting,” Mr Bucks said. “A really simple takeaway is if you add any exposure of your clients to global small caps in their existing equity portfolio, according to the scientists and the actuaries, you will improve their risk adjusted return.”

The Ausbil Global Small Cap Fund’s “Graduate Program” – those small-caps that have now been bought up by mid- and large-cap managers – includes stocks like Generac, a “niche leader” in power generation which is now pushing into emerging markets, and global tech company The Trade Desk, which went from a A$4 billion market cap to A$40 billion in two years.

“When we sold it, a well-known broker had just initiated on it, and I think that says a lot about the way the industry is going at the moment. The analysts don’t cover the stocks…people aren’t looking at what they’re buying, they aren’t looking what the management is actually saying,” Mr Bucks said.

The fund’s up and comers also include InMode, a pioneer in non-invasive aesthetic surgery, and Atkore, an “emerging global titan” in metal stamping and cable management. Two things are required to be a successful small-cap manager, Mr Bucks says: keeping your eyes peeled for attractive valuations and going against the consensus.

“We’re a growth manager, but we masquerade as a value manager. That’s the contrarian aspect, and that’s how we deliver the alpha in small caps….it’s not about value and growth. We’ll give you value and growth by going against consensus.”

Lachlan Maddock

  • Lachlan is editor of Investor Strategy News and has extensive experience covering institutional investment.

    Print Article


    Warning: Attempt to read property "term_id" on string in /nas/content/live/theinsidenetwo/wp-content/themes/intheme/single-post.php on line 270
    Alternatives Symposium 2024: INBrief with Wendell Keuneman from Tidal Ventures

    Wendell Keuneman from Tidal Ventures speaks to Giselle Roux at The Inside Network’s Alternatives Symposium in Melbourne on winners and losers amidst the great pricing reset. The Inside Adviser

    The Inside Adviser | 19th Apr 2024 | More
    Iron-ore prices push higher, bolstering Australian miners

    The S&P/ASX 200 Index rose by 0.5 per cent, driven by the increase in iron ore price. This surge propelled Rio Tinto up by 1.7 per cent, while Fortescue advanced by 0.4 per cent, and BHP increased by 1.5 per cent. The materials sector led gains, adding 1 per cent, followed closely by the technology…

    James Dunn | 19th Apr 2024 | More
    Industry ‘backed up’, waiting to invest in QAR reforms amid election uncertainty

    The government’s reform package may be flawed, but it’s crucial that the first tranche goes through parliament before the next election, Abood said. Further delays will stall vital investment in the financial advice industry.

    Tahn Sharpe | 18th Apr 2024 | More
  • Popular posts: