Andy Parsons, Head of Investment Research at The Share Centre, suggests investors look beyond the UK shorelines for small cap opportunities and highlights the Invesco Perpetual Global Smaller Companies fund as a key player in this arena.
For many investors, exposure to smaller companies is all too often confined to a traditional UK fund that combines a blend of large cap with a selection of small to mid-cap stocks.
Investors feeling slightly more adventurous, may invest in a fund that specifically targets the small to mid-cap arena, however, choice is still predominantly restricted to the UK shorelines. However, there are a growing number of opportunities, of which the Invesco Perpetual Global Smaller Companies fund is one, that offer investors a truly global approach to seeking smaller company opportunities.
Whereas country specific smaller company funds will by their very nature naturally increase overall portfolio volatility and exposure due to potential issues such as currency fluctuation, specific regional exposure or political interference. A truly global fund helps reduce volatility and improve the risk-return reward as these risks are diversified.
By investing in smaller market cap companies on a broad geographical spectrum, investors need to appreciate that a significant number of the holdings are either going to be directly or specifically linked to their local geographical economy, or provide a product or service to a much larger multi-national organisation. In addition, this is likely to lead to a higher number of individual holdings within the overall portfolio.
This fund as at the end of April 2013 had 423 holdings thereby providing investors with the comfort that risk and diversification is truly spread across a vast number of companies and more importantly also across geographical regions.
It is managed on a team basis by Invesco Perpetual, with individuals having responsibility for identifying opportunities from their geographical area of expertise. All ideas are presented to the team and discussed, ensuring only the very best ideas are included within the portfolio.
The largest individual holding currently accounts for only 1.14% of the fund with the top four sectors being Financials, Industrials, Consumer Discretionary and IT. Geographical coverage shows the top four regions as the US, Japan, UK and France.
Finally in terms of performance, the fund is ranked first quartile over both three and five years on a cumulative basis and year to date.