Looking for a global smaller companies fund

El_Torro

My pension has had about 10% of its value in a global smaller companies fund for various years. Specifically the abrdn Global Smaller Companies fund. I was happy enough with the fund at first but it has been quite lackluster for a few years. Looking at other similar funds is making me think that maybe it's time for a switch. I invest in this fund via Hargreaves Lansdown, which gives a discount on its annual charge from 1.04% to 0.77%. Despite the discount HL have recently taken this fund off their recommended Wealth list, which probably means nothing in itself. Though when I had a brief read of the communication it did mention that the fund managers have recently changed. 

One fund I am looking to switch to is the Invesco Global Smaller Companies fund. It seems to have a similar make up geographically as the abrdn fund, the main difference being that in the last 5 years the abrdn fund has grown 1.49% and the Invesco fund has grown 53.18%. The annual charge is 0.90%, so a bit higher than the abrdn fund with the HL discount.

I know we shouldn't be chasing past performance and a 5 year performance can be considered too short for comparison purposes. However is that still true when comparing similar actively managed funds? Is the abrdn Global Smaller Companies fund simply badly managed, or are we expecting a resurgence in its performance any day now? 

Any recommendations for a global smaller companies fund will be appreciated. I am looking to stay invested in an actively managed global smaller companies fund, just not sure the one I am using now is the right one. One other option would be to just transfer it all into my multi asset funds, though I would prefer not to give up on smaller companies just yet.

InvesterJones

Not a recommendation, but small cap global ETFs like WLDS will likely be cheaper on a platform like HL due to the capped fees.

aroominyork

This might be of interest https://monevator.com/avantis-global-small-cap-value-etf-review-avsg/

EthicsGradient

There is also Vanguard Global Small-Cap Index (an OEIC, though based in Ireland), which has outperformed the active Invesco fund over 10 years. Annual charge 0.29%. It has fewer "micro" companies than the Avantis one mentioned above - Vanguard Medium 34%, Small 51%, Micro 13%, compared to Aventis Medium 17%, Small 37%, Micro 46%, at the last figures I found. Whether that's what you want I don't know.

El_Torro

I've steered clear of ETFs until today, putting my faith in funds instead. Might be time to change my mindset though. The Avantis Global Small Cap Value ETF does look intriguing, though as the Monevator article says there isn't a long track record for it.

I'm not 100% against a tracker fund like the Vanguard one. I chose an actively managed fund initially for small caps because the idea was they would have a better understanding of which small companies would perform well and which wouldn't. Hard to argue with Vanguard Global Small-Cap's results though.

Food for thought at least. Some leads for me to investigate.

InvesterJones

El_Torro said:

I'm not 100% against a tracker fund like the Vanguard one. I chose an actively managed fund initially for small caps because the idea was they would have a better understanding of which small companies would perform well and which wouldn't. 

Better than...?

Remember the prices of indexes/passive funds are determined only by active investors in the first place, so unless you are certain one specific active fund somehow has better knowledge, you're comparing active understanding with a consensus view of active understanding.

masonic

InvesterJones said:

El_Torro said:

I'm not 100% against a tracker fund like the Vanguard one. I chose an actively managed fund initially for small caps because the idea was they would have a better understanding of which small companies would perform well and which wouldn't. 

Better than...?

Remember the prices of indexes/passive funds are determined only by active investors in the first place, so unless you are certain one specific active fund somehow has better knowledge, you're comparing active understanding with a consensus view of active understanding.

Though things are a little different when the fund managers restrict themselves to the pool of smaller companies - too much consensus and, perversely, the companies they agree have the best prospects are pushed beyond reach.

OldScientist

InvesterJones said:

El_Torro said:

I'm not 100% against a tracker fund like the Vanguard one. I chose an actively managed fund initially for small caps because the idea was they would have a better understanding of which small companies would perform well and which wouldn't. 

Better than...?

Remember the prices of indexes/passive funds are determined only by active investors in the first place, so unless you are certain one specific active fund somehow has better knowledge, you're comparing active understanding with a consensus view of active understanding.

Interestingly, US small cap is one area where according to the SPIVA results, a majority (60-70%) of active funds outperformed over periods of up to 3 years. Practically, I guess this would mean picking a winning fund in advance, holding for 3 years and then picking another winning fund, and so on. Although, personally, I'm not certain how to pick a winning fund in advance.

My understanding is that one of the biggest problems for successful small cap active managers is inflows since there is a limited amount of available shares to invest in (in other words, eventually the fund will become more like the index).

GeoffTF

OldScientist said:

Interestingly, US small cap is one area where according to the SPIVA results, a majority (60-70%) of active funds outperformed over periods of up to 3 years. 

The index is the performance of the average dollar invest in the market. Passive investors in that index track the index. What is left after that is subtracted is the index. If the funds that SPIVA tracked outperformed the index, someone else must have underperformed it. Who is that?

EthicsGradient

GeoffTF said:

OldScientist said:

Interestingly, US small cap is one area where according to the SPIVA results, a majority (60-70%) of active funds outperformed over periods of up to 3 years. 

The index is the performance of the average dollar invest in the market. Passive investors in that index track the index. What is left after that is subtracted is the index. If the funds that SPIVA tracked outperformed the index, someone else must have underperformed it. Who is that?

That would be the 40-30%; and this can work if the majority slightly outperform the index, while the underperformers do really badly.

Plus it's possible that individual investors are more of a factor in the small cap arena (I have no idea if that's true), and they're doing badly.