Smaller companies fund/trust

george4064

I have held the global small cap tracker WLDS for a while and happy to continue holding. 56% of the portfolio is in United States and a cheap TER of 0.35%.

I tend to agree with other posters views that active vehicles for small caps is worth it because generally speaking the underlying companies are less researched than large caps so potentially more to gain via active management. Personally my total small cap exposure is via this global small cap tracker with some individual AIM stocks I hold, I also happen to have my Japanese exposure via a smaller companies IT (BGS) but that investment is predominantly to gain exposure to Japan rather than small caps.

Bobziz

AnotherJoe said:

I agree with your reasoning and bought an active global fund focussed on smaller companies to replace a smaller companies global index ETF maybe a year ago. Baillie Gifford global discoveries was the one I ended up with. Prior to that I had a passive index fund but that did poorly.  

BG have a very good reputation as fund managers. I'd have preferred an IT but this is an OEIC. I do recall that looking at its constituents and then comments on them, I felt comfortable with them. I can't recall all the reasoning / research that lead to me selecting this from other global smaller companies funds so I'll just have to trust my self of a year ago that I did an OK job picking it from the others.  

As an aside do find it strange it contains Tesla, I'd have preferred it didn't as I also hold that directly and via SMT but if you don't  hold Tesla then this would be a good fund for that reason also. Not quite sure how Tesla counts asa smaller company any more though. Maybe technically because it's not in the S&P, but by market cap it's one of the largest. 

P.s. like you I originally started with the thought that a passive global with satellite smaller companies at say 10-15% is a good mix but looking at long term performance charts I'm starting to think that if anything the reverse is a better idea, and maybe you might decide not to rebalance but let the smaller cos run and take up a larger share. 

Yes, I have the same question re the inclusion of Tesla in the BGGD fund. My assumption it that it was a small cap when they first invested in it. Begs the question, which no doubt someone will know, at what point do small cap funds ditch companies, once their value exceeds $5b ? 

On passive v's active, I've read the commentary that over time passive investing beats active. What are the assumptions here though ? you pick a selection of active funds and stick with them for the same duration as the passive ? Also, at what point is the race run and the tortoise declared the winner ?

jamei305

Bobziz said:

AnotherJoe said:

I agree with your reasoning and bought an active global fund focussed on smaller companies to replace a smaller companies global index ETF maybe a year ago. Baillie Gifford global discoveries was the one I ended up with. Prior to that I had a passive index fund but that did poorly.  

BG have a very good reputation as fund managers. I'd have preferred an IT but this is an OEIC. I do recall that looking at its constituents and then comments on them, I felt comfortable with them. I can't recall all the reasoning / research that lead to me selecting this from other global smaller companies funds so I'll just have to trust my self of a year ago that I did an OK job picking it from the others.  

As an aside do find it strange it contains Tesla, I'd have preferred it didn't as I also hold that directly and via SMT but if you don't  hold Tesla then this would be a good fund for that reason also. Not quite sure how Tesla counts asa smaller company any more though. Maybe technically because it's not in the S&P, but by market cap it's one of the largest. 

P.s. like you I originally started with the thought that a passive global with satellite smaller companies at say 10-15% is a good mix but looking at long term performance charts I'm starting to think that if anything the reverse is a better idea, and maybe you might decide not to rebalance but let the smaller cos run and take up a larger share. 

Yes, I have the same question re the inclusion of Tesla in the BGGD fund. My assumption it that it was a small cap when they first invested in it. Begs the question, which no doubt someone will know, at what point do small cap funds ditch companies, once their value exceeds $5b ? 

Baillie Gifford Global Discovery is not a smaller companies fund, it is a global equity fund. Their remit is "The Fund will invest in shares of companies in any sector which typically at the time of initial purchase have a market capitalization of US$5 billion or less." They can continue to hold such companies regardless of how big they grow.

Prism

Bobziz said:

AnotherJoe said:

I agree with your reasoning and bought an active global fund focussed on smaller companies to replace a smaller companies global index ETF maybe a year ago. Baillie Gifford global discoveries was the one I ended up with. Prior to that I had a passive index fund but that did poorly.  

BG have a very good reputation as fund managers. I'd have preferred an IT but this is an OEIC. I do recall that looking at its constituents and then comments on them, I felt comfortable with them. I can't recall all the reasoning / research that lead to me selecting this from other global smaller companies funds so I'll just have to trust my self of a year ago that I did an OK job picking it from the others.  

As an aside do find it strange it contains Tesla, I'd have preferred it didn't as I also hold that directly and via SMT but if you don't  hold Tesla then this would be a good fund for that reason also. Not quite sure how Tesla counts asa smaller company any more though. Maybe technically because it's not in the S&P, but by market cap it's one of the largest. 

P.s. like you I originally started with the thought that a passive global with satellite smaller companies at say 10-15% is a good mix but looking at long term performance charts I'm starting to think that if anything the reverse is a better idea, and maybe you might decide not to rebalance but let the smaller cos run and take up a larger share. 

Yes, I have the same question re the inclusion of Tesla in the BGGD fund. My assumption it that it was a small cap when they first invested in it. Begs the question, which no doubt someone will know, at what point do small cap funds ditch companies, once their value exceeds $5b ? 

On passive v's active, I've read the commentary that over time passive investing beats active. What are the assumptions here though ? you pick a selection of active funds and stick with them for the same duration as the passive ? Also, at what point is the race run and the tortoise declared the winner ?

It is typically up to the manager if or when they choose to drop an investment, depending what rules that are set out for the fund. So for example the Smithson prospectus includes this 'whose market capitalisation at the time of investment is between £500m and £15 billion' in relation to companies they invest in. That basically means there is no top end limit of how large a company can grow and still be held.

If you selected a random active fund, held it for a period of time and then compared it to a suitable benchmark it is highly likely that it would have underperformed. Over 5 years there is currently one sector exception (UK Smaller companies) but over 10 years there are none.

However there is a bit more detail under the cover. Some of those active funds have out performed so significantly that they swing the averages so for example if you had held 1 unit of every UK smaller companies fund over the last 5 years you would have outperformed the benchmark.

That also makes it more obvious that choosing the correct fund in the sector is important. We can try and judge how good people are at selected those correct funds by looking at the asset weighted stats where the size of each fund comes into account. It seems that in very few sectors over extended periods people can do this. All UK equity sectors (large, medium and small) plus European equity  do relatively well for active investors. Anything that involves US stocks (US and Global) does poorly.

Here is the most recent scorecard
https://www.spglobal.com/spdji/en/documents/spiva/spiva-europe-mid-year-2020.pdf

homestraight

Thanks all. Some really useful thoughts for me to research further. 

homestraight

Moe_The_Bartender said:

I like SSON very much although it’s debatable whether it actually invests in small companies. Smaller than its stablemate, Fundsmith, but still fairly large.

I hadn't considered SSON

Thanks. I'll include it on my shortlist

homestraight

Thrugelmir said:

What's your definition of small?   

JPMorgan Japan Smaller Cos (JPS)

Henderson Smaller Companies (HSL)

Invesco Perpetual UK Smaller Cos (IPU)

Oryx International Growth Fund (OIG)
Herald (HRI)
Montanaro UK Smaller Cos (MTU)
North Atlantic Smaller Cos (NAS)
Augmentum Fintech (AUGM)

Thanks to Linton and you for your lists. 

My thoughts are a loose approach to small companies which I'd describe as those providing meaningful diversification and growth potential but not included by an all- world tracker such as hsbc

Thrugelmir

msallen said:

I've been happy with EWI which I've had for a couple of years or so, but my selection was limited due to holding it at x-o where OEICs aren't an option.

As much as I like EWI. I'm struggling to call it's holdings small companies at multi billion £ valuations. My smallest direct share holding is in an LSE listed company capitalised at just £22 million. 

Thrugelmir

homestraight said:

Thrugelmir said:

What's your definition of small?   

JPMorgan Japan Smaller Cos (JPS)

Henderson Smaller Companies (HSL)

Invesco Perpetual UK Smaller Cos (IPU)

Oryx International Growth Fund (OIG)
Herald (HRI)
Montanaro UK Smaller Cos (MTU)
North Atlantic Smaller Cos (NAS)
Augmentum Fintech (AUGM)

Thanks to Linton and you for your lists. 

My thoughts are a loose approach to shake companies which I'd describe as those providing meaningful diversification and growth potential but not included by an all- world tracker such as hsbc

With investment trusts you can exploit the discount anomalies that arise. Though patience maybe required. 

homestraight

Thrugelmir said:

homestraight said:

Thrugelmir said:

What's your definition of small?   

JPMorgan Japan Smaller Cos (JPS)

Henderson Smaller Companies (HSL)

Invesco Perpetual UK Smaller Cos (IPU)

Oryx International Growth Fund (OIG)
Herald (HRI)
Montanaro UK Smaller Cos (MTU)
North Atlantic Smaller Cos (NAS)
Augmentum Fintech (AUGM)

Thanks to Linton and you for your lists. 

My thoughts are a loose approach to shake companies which I'd describe as those providing meaningful diversification and growth potential but not included by an all- world tracker such as hsbc

With investment trusts you can exploit the discount anomalies that arise. Though patience maybe required. 

That was something I'd looked at in the past. It wouldn't drive my choice on this purchase but might be a nice bonus. 
I'd always go with time in the market rather than timing but I can be somewhat patient. 

Do expect much movement pre or post US election? 
I'll make a shortlist and watch the prices closely