Australian small caps at an inflection point
We believe the Australian small caps market is at an inflection point given the more favourable macro-economic backdrop and expected earnings trajectory. With a lot of negative sentiment ‘priced in’ to Australian small companies, and signs of easing financial conditions, moderating inflation and peaking interest rates, we believe calendar 2024 should be one of the most favourable environments for the Australian small cap sector's outperformance since the GFC.
Importantly, we believe the domestic small cap landscape has evolved significantly over the past 15 years, as the Benchmark (S&P/ASX Small Ordinaries Total Return Index) is now comprised of higher quality stocks. In our view there are now far more small cap stocks with positive earnings, strong balance sheets and Return on Equity has steadily increased over time. These factors help support the case for a persistent small cap premium on the ASX (similar to most other global exchanges), as compared to a historic discount.
History shows small companies are often one of the first parts of the market to recover as economies come through weaker times. This phenomenon was on display both domestically and in the US in the latter part of 2023.
In this environment, selecting the right small cap manager is as important as the decision to allocate to the sector.
About the Maple-Brown Abbott Australian Small Companies Fund
The Australian small cap manager with large institutional backing is now available to advisers.
The Maple-Brown Abbott Australian Small Companies Fund (the Fund) is managed by our experienced Australian small companies team, led by Co-Portfolio Managers Phillip Hudak and Matt Griffin. The Fund continues to generate what we consider to be strong returns since inception (24 June 2022), returning 21.8%, outperforming the benchmark S&P/ASX Small Ordinaries Total Return Index by 12.1% on an annualised basis. This follows on from the strategy’s strong performance over nine years at AMP Capital*, where the same ‘earnings drive share prices’ philosophy and investment process was applied.
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Our investment philosophy
Rather than defining ourselves by a particular investment style, our investment philosophy is based on our belief that earnings drive share prices. Our three core beliefs underpinning the philosophy are:
- share price performance is driven by medium-term earnings delivery with consideration given to valuation and where the company is in the earnings cycle;
- sustainable business models, which include a company’s persistence of earnings over longer time periods, are an important driver of long-term performance and superior risk-reward characteristics; and
- companies which disappoint on short-term earnings expectations typically underperform.
By taking time to understand where a company is in the earnings cycle, we can determine the price paid for the future earnings stream. Given the breadth of the Australian small cap market, we believe we can find undervalued companies where we have conviction in medium-term earnings delivery at any point of the market cycle.
Find out more
- About the Maple-Brown Abbott Australian Small Companies Fund
- About Maple-Brown Abbott
- About our small companies team
- Our latest commentary
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Fund ratings
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Lonsec
The Lonsec rating issued 10/2023 is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings information and to access the full report. ©2023 Lonsec. All rights reserved.
Morningstar Medalist Rating(TM)
Assigned as of 15/12/23
Analyst Driven % 100
Data Coverage % 100
Fund Maple-Brown Abbott Australian Small Companies received a Morningstar Medalist Rating(TM) of 'Silver' on 15/12/23.
© 2024 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This report or data has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or New Zealand wholesale clients of Morningstar Research Ltd, subsidiaries of Morningstar, Inc. Any general advice has been provided without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Morningstar’s publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a financial adviser.
Zenith
The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned MPL1241AU February 2024) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual, including target markets of financial products, where applicable, and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at Fund Research Regulatory Guidelines.
A team of experienced and dedicated investment professionals.
Phillip Hudak
Co-Portfolio Manager, Australian Small Companies
Matt Griffin
Co-Portfolio Manager, Australian Small Companies
William Hanna
Investment Analyst, Australian Small Companies
Ayesha Azeem
ESG Investment Analyst
Contact us
Vijay Srinivasan
Head of Wholesale Distribution
E vsrinivasan@maple-brownabbott.com
T +61 2 8226 6238
M +61 403 046 832
* The past performance and experience of the portfolio managers was achieved managing a different fund with substantially the same investment strategy as the Fund. Past performance is not a reliable indicator of future performance.
This information was prepared and issued by Maple-Brown Abbott Ltd ABN 73 001 208 564, Australian Financial Service Licence No. 237296 (“MBA”). This information does not constitute investment advice or an investment recommendation of any kind and should not be relied upon as such. This information is general information only and it does not have regard to any person’s investment objectives, financial situation or needs. Before making any investment decision, you should seek independent investment, legal, tax, accounting or other professional advice as appropriate, and obtain the relevant Product.
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Fund performance^
as at 30/06/2024
| 1 mth % | 3 mths % | 1 yr % p.a. | Since inception % p.a.* | |
| Fund | 1.1 | -0.2 | 17.4 | 18.8 |
| Benchmark | -1.4 | -4.5 | 9.3 | 8.1 |