Eley Griffiths Group Small Companies principally invests in shares of Australian companies listed on the ASX that fall outside the S&P/ ASX 100 Index and some cash. The Investment Manager is an active manager who makes decisions about buying and selling investments of the Fund on a daily basis. The Fund aims to outperform the S&P/ASX Small Ordinaries Accumulation Index over a rolling 3 year period.
The Small Companies Fund offers investors exposure to a diversified portfolio of Australian listed small companies that reside outside the S&P ASX100 Index. The Fund is benchmarked against the S&P ASX Small Ordinaries Accumulation Index and has a 19 year track of record of outperformance.
The team combines fundamental bottom-up research of companies with an in-depth qualitative assessment of their management and industry structure. Our proprietary investment process, known as SCOPE (Small Company Optimal Portfolio Evaluation), is a relative stock scoring tool that ranks stocks from highest to lowest based on their score. The portfolio comprises the best scoring stocks, subject to a number of risk constraints, such as maximum active position size (5%) and liquidity.
The outworking of this process is a portfolio that typically exhibits both growth and value characteristics that aims to outperform through the market cycles.
What is Eley Griffiths Group Small Companies Eley Griffiths Group Small Companies is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Small Cap Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Eley Griffiths Group Small Companies has Assets Under Management of 464.52 M with a management fee of 1.25%, a performance fee of 0.01% and a buy/sell spread fee of 1.39%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Eley Griffiths Group Small Companies has returned 4.03% in the last month. The previous three years have returned 5.23% annualised and 16.75% each year since inception, which is when the Eley Griffiths Group Small Companies first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Eley Griffiths Group Small Companies first started, the Sharpe ratio is NA with an annualised volatility of 16.75%. The maximum drawdown of the investment product in the last 12 months is -4.48% and -52.58% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Eley Griffiths Group Small Companies has a 12-month excess return when compared to the Domestic Equity - Small Cap Index of 6.34% and 0.28% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Eley Griffiths Group Small Companies has produced Alpha over the Domestic Equity - Small Cap Index of NA% in the last 12 months and NA% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Small Cap Index category, you can click here for the Peer Investment Report.
What level of diversification will Eley Griffiths Group Small Companies provide? Eley Griffiths Group Small Companies has a correlation coefficient of 0.96 and a beta of 1.08 when compared to the Domestic Equity - Small Cap Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Eley Griffiths Group Small Companies and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Eley Griffiths Group Small Companies with the ASX Index Small Ordinaries Index? For a full quantitative report on Eley Griffiths Group Small Companies compared to the ASX Index Small Ordinaries Index, you can click here.
Can I sort and compare the Eley Griffiths Group Small Companies to do my own analysis? To sort and compare the Eley Griffiths Group Small Companies financial metrics, please refer to the table above.
Has the Eley Griffiths Group Small Companies been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Eley Griffiths Group Small Companies. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The Eley Griffiths Group Small Companies Fund (Fund) finished -0.3% lower in August, outperforming the Small Ordinaries Accumulation Index which decreased -1.3%. Since its inception in September 2003, the Fund has delivered a return of +9.9% per annum after fees for its unitholders.
In August, observers of the global macroeconomic landscape witnessed a potential peak in interest rates alongside further evidence of a decline in inflation. Despite Federal Reserve Chair Powell’s cautious stance on inflation at the Jackson Hole summit, market analyst conceded a low likelihood of further rate hikes, and an eventual shift to potential rate cuts. International markets experienced weakness, primarily driven by concerns about China’s economic slowdown and a fragile property market, with obvious repercussions for resource stocks.
Domestically, investors were trained on the reporting season. Short-term volatility persisted, and the reporting season yielded mixed results, with a greater number of companies surpassing expectations. However, there was a prevalence of FY24 profit downgrades outweighing upgrades. Consumer strength emerged as a significant topic of discussion, as certain consumer-oriented companies surpassed modest expectations, amid mounting headwinds in the retail sector. Meanwhile, cost management proved disappointing, primarily attributed to elevated interest and labour costs, both having a discernible impact on sector profitability.
The key detractor to performance was the financial technology firm Iress (IRE; -38%). A disappointing half-year result driven by cost pressures, including notable increases in tech infrastructure expenses, market data costs, and inflationary salary expenditures. IRE is currently in the midst of implementing a revamped strategy under new leadership.
In the month significant portfolio holding Boral (BLD) rose by 8%, and Carsales.Com (CAR) jumped 16%. BLD, in the building products sector, excelled with a fourfold increase in net profit during FY23, Vik Bansal’s first full year as CEO. To boost profitability, Bansal focused on increasing sales volume, raising prices, and cutting costs. CAR’s FY23 performance surpassed expectations. In Australia, the high demand for used cars and increasing interest in highervalue products were key drivers. Meanwhile, in North America, CAR witnessed customer growth, a rise in premium product adoption, and enhanced returns on private ads due to dynamic pricing strategies.
Performance Commentary - July 31, 2023 The Small Companies Fund offers investors exposure to a diversified portfolio of Australian listed small companies that reside outside the S&P ASX100 Index. The Fund is benchmarked against the S&P ASX Small Ordinaries Accumulation Index and has a 19 year track of record of outperformance.
The team combines fundamental bottom-up research of companies with an in-depth qualitative assessment of their management and industry structure. Our proprietary investment process, known as SCOPE (Small Company Optimal Portfolio Evaluation), is a relative stock scoring tool that ranks stocks from highest to lowest based on their score. The portfolio comprises the best scoring stocks, subject to a number of risk constraints, such as maximum active position size (5%) and liquidity.
The outworking of this process is a portfolio that typically exhibits both growth and value characteristics that aims to outperform through the market cycles.
Performance Commentary - June 30, 2023 The Eley Griffiths Group Small Companies Fund (Fund) increased +2.7% in June, outperforming the Small Ordinaries Accumulation Index, which remained flat for the month. Over the financial year, the fund achieved a gain of +16.6%. Since its inception in September 2003, the Fund has delivered a return of +9.8% per annum after fees for its unitholders.
Global markets displayed strength in June, with positive sentiment fuelled by lower-than-expected inflation figures and encouraging economic data in the United States. The S&P 500 index surged by +6.5% and officially entered a bull market, defined as a 20% rise from recent lows. On the other hand, the local market showed a more subdued performance, influenced by the Reserve Bank of Australia (RBA) raising interest rates due to resilience in the labour market and wage pressures, thereby creating uncertainty about the ultimate peak in rates.
Contributions to performance during June included Navigator Global Investments (NGI +34%) Paladin Energy (PDN +34%) and HMC Capital (+15%).
NGI reached an agreement with Dyal Capital to expedite an outstanding payment due in 2026, which allowed for the acquisition of the remaining profit distributions from a portfolio consisting of six minority ownership interests in alternative asset managers. PDN, which holds a majority stake in the Namibia-based Langer Heinrich mine, rebounded following reports that Namibia did not intend to nationalise any natural resources as speculated in May, and there were no plans to seize stakes from existing license holders in minerals or petroleum.
Detractors to performance included Capricorn Metals (-7%), EBOS Group (EBO -13%), and Monadelphous Group (-4%).
EBO, a pharmaceutical distributor, received news that its supply contract with Chemist Warehouse would not be renewed. The new supplier offering an ownership stake in their business to the pharmacy giant as a component of the new agreement.
Looking ahead, we maintain a positive outlook for small and emerging companies. Valuations have adjusted and earnings profiles have normalised. As investor confidence in the inflation/interest rate outlook increases, we anticipate a return of capital to the smaller end of the ASX into discounted stocks, similar to that observed after the Global Financial Crisis (GFC) and the COVID-related market lows.
Performance Commentary - May 31, 2023 In May, the Small Ordinaries Accumulation Index experienced a decline of -3.3%. The Eley Griffiths Group Small Companies Fund performed in line with its benchmark, finishing lower -3.2%. Since inception (September 2003) the Fund has delivered a return of +9.7% p.a after fees.
As throughout the year, investors have faced challenges such as high inflation and rising interest rates in the month. The resolution of the US debt ceiling issue in the final hour also added to the macroeconomic complexity. Negative trading updates from the retail sector, indicating a potential slowdown in consumer activity had an impact on market sentiment. A profit warning from Universal Store (UNI) triggered selling across the entire Consumer Discretionary sector (-6.4%). Portfolio holding Lovisa (-23%), which shares a similar customer profile to UNI detracted from performance.
Simultaneously, US chip-stock NVIDIA exceeded market expectations driven by surging demand for AI-related graphics processing units. This led to a significant rotation of investment from under pressure consumer/cyclical sectors into Information Technology sector (+6.9%). Tech companies with strong cash flow and exposure to AI attracted investors’ interest.
Weighing on the portfolio was weakness in Small Resources (-7.1%). However, there were more positive signs for the Lithium market, with indications of restocking across the battery supply chain and increased electric vehicle sales in China.
Notable contributor to performance during the month was OFX Group (+28%). The company rebounded following the announcement of an above-consensus earnings guidance, share buyback and an acquisition.
Trading volumes decreased when interest rates began tightening in 2022, leading to decreased liquidity and sentiment, particularly in small/micro industrials. However, recent weeks have seen a rebound in trading volumes, approaching the long-run average. The economic cycle is not to be confused with the market cycle. The latter will move well ahead of time, discounting poor news and looking forward to consumer and business revival.
Performance Commentary - April 30, 2023 The Eley Griffiths Group Small Companies Fund (Fund) increased 3.8% in April, outperforming the Small Ordinaries Accumulation Index return of 2.8%. The Small Ords outperformed large caps in the month, turning a corner following a period of underperformance. Since inception (September 2003) the Fund has returned 9.9% p.a. after fees for unitholders.
Market volatility subsided and sentiment improved in April. US regional bank failures were ringfenced when the US Federal Reserve established a lending program to help meet bank customer withdrawals, avoiding the need for banks to sell treasury bonds at a loss. US company earnings results season kicked off on a positive note with better than feared results.
Building Materials names Boral (BLD; +17%) and Brickworks (+12%) performed strongly in the month. Evidence inflation was trending downward and the RBA pausing cash rate hikes the catalyst. The sector has been challenged by disrupted global supply chains, higher prices, and labour shortages.
Management track record, strategy and alignment are cornerstones of our qualitative assessment process. An example of highly regarded leadership is Raleigh Finlayson, MD of gold miner Genesis Minerals (GMD; +22%) who announced the proposed acquisition of St Barbara’s Leonora assets. Finlayson built his track record by creating value for shareholders at Saracen (now part of Northern Star Resources). Recently it was revealed that GMD may face competition for the assets, which will play out in the coming months.
Biotech holding ImpediMed (+76%) backed up its +75% surge in March on the announcement the US National Comprehensive Cancer Network (NCCN) released new guidelines that bioimpedance spectroscopy (BIS) is an objective measurement tool to identify early signs of lymphoedema. IPD possesses the sole FDA-cleared BIS technology.
Detracting from returns was Champion Iron (-9%) as Chinese steel mills entered a maintenance period. As a result, resources were softer especially Iron Ore which declined 18% in the month. Gold names consolidated after sharp rises last month, Capricorn Metals eased -7%.
Equity markets look through the underlying economic conditions anticipating the next cycle. Further evidence that inflation continues its downward trajectory will endorse the view that the top of the interest rate cycle is within reach. Hence, our analysis is focused on the names likely to drive the market over the next 12-24 months.
Performance Commentary - February 28, 2023 After increasing +6.6% in January, the Small Ordinaries Accumulation Index retraced -3.7% in the month. The Eley Griffiths Group Small Companies Fund finished -6.0% lower and since inception (September 2003) the Fund has returned +9.8% p.a. after fees for unitholders.
A collection of strong US economic data coming in ahead of expectations triggered moves across all asset classes. The data hit sentiment as it supported the view that the US Federal Reserve will be forced to stay on its interest rate tightening path. Against this backdrop defensive names outperformed, the opposite to January which saw Growth stocks rally as investors speculated peak inflation had been reached. Gold names fell and detracted from performance as the US 10yr Treasury Yields rose by >40bps.
Overall, the first half year reporting season showed top line revenue numbers remain robust. Higher costs are hitting corporate margins, especially wage inflation which is now the focus rather than labour availability. Management outlooks were generally conservative acknowledging that the economic backdrop is likely to soften. Portfolio holdings which beat earnings expectation and contributed to returns in the month were Boral (+5.8%) and Tyro Payments (+11.1%).
The Chinese re-opening trade stalled prompting Small Resources (-9.2%) underperformance of Small Industrials (-2.0%) with weakness across several commodity benchmarks and contracting companies citing cost inflation as prompting delays in capex intentions.
Looking ahead, despite the surprisingly strong US jobs data in the month, Chair of the US Federal Reserve, Jerome Powell said that the disinflationary process “had begun” and that the US was in the “early stages of disinflation” (7 February 2023, Economic Club of Washington speech). The expected gradual downward trend of inflationary data points is likely to lend support to equity markets.
Performance Commentary - December 31, 2022 Equity markets could not maintain the strength of the previous two months drifting lower in December. The Small Ordinaries Accumulation Index returned -3.7%, the Eley Griffiths Group Small Companies Fund finished -4.0% lower and since inception (September 2003) the Fund has returned +9.7% p.a. after feesfor unitholders.
Despite the US November consumer price index (CPI) print coming in below expectations and the lowest in a year, US Federal Reserve chairman Jerome Powell’s signalled that interest rate increases will continue, albeit at a slower pace. Powell dampened hopes of a Fed ‘pivot’ suggesting rates may stay higher for longer to achieve price stability, implying a return to 2% inflation overtime. (Powell’s Press Conference December 14)
Contributing to the Funds performance in the month was Champion Iron (+14.9%). The China re-opening story saw Iron Ore close +19% higher in the month notwithstanding investors debate of China’s industrial production and slowing credit concerns as the country tackles escalating Covid cases.
Lithium names retreated In December amid concerns around the sustainability of electric vehicle (EV) demand and weaker battery supply chain destocking. A rotation away from Lithium contributed to Gold’s strength as did the Bank of Japan’s unexpected reversal on its YCC policy (Yield Curve Control) which sent the USD lower triggering commodities priced in USD to trade higher. Contributing to returns in the month was Gold holding Capricorn Metals (+9.5%).
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