Mercer Australian Small Companies Fund aims to exceed the benchmark, before management costs, over the medium to long term. The Fund provides exposure to Australian small companies shares utilising an actively managed, multi-manager approach.
The fund outperformed by 2.2% over the quarter, driven by an underweight to Materials and positive stock selection within the sector. This was complemented with strong stock selection in IT, Real Estate, Financials and Communication Services names. Further outperformance was limited by negative stock selection in Energy, Consumer Discretionary and Health Care names. From a stock perspective, high conviction positions in News Corp, Domain Holdings and CSR Limited were among top contributors to outperformance while an underweight to Telix Pharmaceuticals was the top detractor over the period. On the manager level, high conviction manager, Firetrail, was the strongest performer over the quarter with relative performance in excess of 7%. Portfolio positions including Estia Health and Silk Laser advanced on acquisition approaches, driving alpha over the period.
What is Mercer Australian Small Companies Mercer Australian Small Companies is an Managed Funds investment product that is benchmarked against ASX Index Small Ordinaries Index and sits inside the Domestic Equity - Micro 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 Mercer Australian Small Companies has Assets Under Management of 722.06 M with a management fee of 1%, a performance fee of 0.00% and a buy/sell spread fee of 0.58%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Mercer Australian Small Companies has returned 3.87% in the last month. The previous three years have returned 1.09% annualised and 17.04% each year since inception, which is when the Mercer Australian 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 Mercer Australian Small Companies first started, the Sharpe ratio is NA with an annualised volatility of 17.04%. The maximum drawdown of the investment product in the last 12 months is -5.86% and -57.97% 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 Mercer Australian Small Companies has a 12-month excess return when compared to the Domestic Equity - Micro Cap Index of 0.65% and -2.93% 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. Mercer Australian Small Companies has produced Alpha over the Domestic Equity - Micro 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 - Micro Cap Index category, you can click here for the Peer Investment Report.
What level of diversification will Mercer Australian Small Companies provide? Mercer Australian Small Companies has a correlation coefficient of 0.98 and a beta of 1.13 when compared to the Domestic Equity - Micro 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 Mercer Australian Small Companies and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Mercer Australian Small Companies with the ASX Index Small Ordinaries Index? For a full quantitative report on Mercer Australian Small Companies compared to the ASX Index Small Ordinaries Index, you can click here.
Can I sort and compare the Mercer Australian Small Companies to do my own analysis? To sort and compare the Mercer Australian Small Companies financial metrics, please refer to the table above.
Has the Mercer Australian 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 Mercer Australian Small Companies. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - March 31, 2023 Australian Small Companies performance was positive over the January quarter with the asset class returning 0.7% for the period. Australian Small Companies underperformed the broad capitalisation index over the quarter.
The fund underperformed the benchmark by 1.2% over the quarter. Stock selection was the biggest negative contributor to performance whilst sector allocation provided positive performance. Underweight to materials and overweights to consumer discretionary and financials were the most significant underperformers over the quarter. While not enough to offset this, overweights to industrials and communication services as well as an underweight to real estate were the most significant underperformers over the quarter. At a stock level, overweights to Domain Holdings, Smart Group and Janus Henderson were positive. The negative stock contributors includedoverweights in Enero Group, Superloop Ltd and News Corp.
Performance Commentary - December 31, 2022 The fourth quarter of 2022 began with two strong consecutive months in October and November followed by a selloff in December. Investor optimism seemed to return in October and November following better than expected inflation readings, however, in December sentiment deteriorated as Central Banks reiterated their commitment to monetary tightening, which clawed back some of the gains established earlier in the quarter.
Hedged Developed Market Overseas Shares returned 7.2% over the quarter as earnings proved to be resilient so far and some signs of declining inflation emerged. Unhedged Overseas shares gains were modest in comparison at 3.9% given the decline of the USD in Q4. Australian Shares also posted strong gains of 9.1% over Q4 given the defensive composition of the index, with large relative weights in materials and financials helping the index outperform its global counterparts. Emerging market equities gains were slightly more subdued at 4.0%, most of the gains coming from Chinese equities in November and December following an easing of COVID restrictions.
Hedged Overseas Government Bonds were relatively muted over the quarter, returning -0.7% as major developed bonds yields increased slightly. Fixed income investors positioned for continued monetary tightening following hawkish guidance from all major central banks. Over the quarter inflation expectations for the US rose, as measured by the 10-year inflation breakeven rate which grew from 2.15% to 2.30%.
Australian shares outperformed hedged overseas shares over the quarter with the ASX 300 gaining 9.1%. The S&P/ASX 50 was the best performing Australian index, gaining 9.7%. The strongest performing sector was Utilities (28.0%) followed by Materials (14.7%), whilst the worst performing sectors were Consumer Staples (1.7%) and IT (1.9%). BHP was the top contributor (21.7%), whilst CSL was the largest negative contributor (1.3%).
Performance Commentary - September 30, 2022 The fund performance was negative over the September quarter with the asset class returning -0.5% for the period. The fund did outperform the broad capitalisation index over the quarter.
Performance Commentary - June 30, 2022 Australian Small Companies performance was negative over the June quarter with the asset class returning -20.4% for the period. Australian Small Companies underperformed the broad capitalisation index over the quarter.
The Australian small caps struggled during the quarter with the small ords delivering a return of -20.4%. In addition to general market concerns over inflation and interest rates, unjustified valuations in the small cap space including speculative ‘new energy’ resource names are now facing an abrupt re-pricing of reality. There are also many small caps who are facing the normal travails of brutal competition, uncertainty in operating conditions and profit outcomes much worse than investors had expected. The Mercer Australian small cap fund outperformed its benchmark by 2.4% over the quarter. During this period, both sector allocation and stock selection had a positive impact on excess fund returns. The fund’s overall underweight to resources helped reduce the difficulties faced by this sector and was a key positive for the fund. The underweight to real estate and overweight to consumer discretionary were key detractors.
Performance Commentary - March 31, 2022 Australian Small Companies performance was negative over the March quarter with the asset class returning -4.2% for the period. Australian Small Companies underperformed the broad capitalisation index over the quarter.
During the first quarter of 2022, both stock selection and asset allocation drove underperformance with stock selection being the most significant. At the sector level, overweights to financials and industrials provided positive returns. This was offset by underweights to materials and real estate sectors which detracted from performance. At the security level, an overweight to SRG Global and an underweight to Chalice Mining were significant contributors to performance while an underweight to Whitehaven Coal and Coronado Global Resources were detractors.
Performance Commentary - December 31, 2020 Performance has been strong over the fourth quarter as the small cap market segment continued its recovery. Individual stock selection has been positive over the quarter while sector allocation and the funds’ cash exposure was a slight drag on performance. Despite a resurgence in COVID-19 cases across NSW and Victoria over the quarter, markets were buoyant on the mass vaccine rollout and the outcome of US elections. At the security level, underweight positions in Mesoblast, Regis Resources and Chorus whilst an overweight position in NRW Holdings were the largest positive contributors. Overweight exposures in Marley Spoon and Fineos Corporation were key detractors.
Performance Commentary - September 30, 2020 Australian Small Companies performance was positive over the September quarter with the asset class returning 5.7% for the period. Australian Small Companies outperformed the broad capitalisation index over the quarter.
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