Ben Chan, BComm, BEng (Hons), CFA, Portfolio Manager, Fairview Equity Partners
Tim Hall, BComm, Portfolio Manage, Fairview Equity Partners
Leo Barry, BSA, MBA, Portfolio Manager, Fairview Equity Partners
Fairview Equity Partners is a boutique Australian fund manager exclusively focused upon investing in Australian small companies’ equities.
The Fairview Equity Partners Emerging Companies Fund is managed by Leo Barry, Tim Hall and Ben Chan. The investment team collectively has in excess of 60 years investment experience in funds management and investment research.
Fairview is majority owned by its investment team, with the Insignia Financial Group holding a minority interest. This strengthens the alignment of interests of the investment team and their aim to maximise returns for investors.
Over the past few years, big companies on the Australian stock market have done better than small ones. But things may be changing — and small companies could be ready to shine, in our view.
1. Room to grow
Small companies are often just starting out. That means they have more room to grow compared to big companies that are already well-established.
2. More variety
The Australian small company index (called the ASX Small Ordinaries) is more spread out. No single company dominates it. This gives investment managers more freedom to choose companies they believe in, rather than being forced to include big names just to match the index.
3. Easier to find hidden gems
Big companies get lots of attention from investment industry research analysts. Small ones don’t. That means smart investors can find great businesses before everyone else does.
4. Recent performance
In August, small companies had their best month in over three years — going up about 9% and beating big companies which went up by about 3%.
5. Big companies aren’t always better
Some big names like Commonwealth Bank and Woolworths have had a rough time recently. Their share prices went up a lot over the past few years, but their earnings/profits didn’t grow as fast. This makes their high prices hard to justify, in our view.
6. Small companies still look like bargains
Compared to big companies, small ones are trading at lower valuations. That could mean they’re a better deal right now.
7. Interest rate cuts could boost small companies
Small companies often thrive when interest rates fall, as cheaper borrowing costs enable them to invest in growth. If interest rates continue to decline, these businesses — typically more sensitive to rate cuts — could benefit even further.
Bottom line
Small companies can be riskier, but they also offer more potential for growth. If you’re investing for the long term and can accept ups and downs, adding small companies to your portfolio might be a smart move.
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This communication is issued by MLC Investments Limited ABN 30 002 641 661, AFSL 230705 (‘MLCI’), the responsible entity of, and the issuer of units in, the Fairview Equity Partners Emerging Companies Fund, ARSN 133 197 501 (the ‘Fund’). MLCI has appointed Fairview Equity Partners Pty Ltd (‘Fairview’), ABN 45 131 426 938, AFSL 329052, a specialist Australian small company equities manager, as investment manager of the Fund. Fairview is majority owned by its investment team, with a minority interest being owned by the Insignia Financial group (comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate) (‘Insignia Group’).
This communication is general in nature and does not take into account any investor’s particular objectives, financial situation or needs. Investors should, before acting on information in this communication, consider its appropriateness, having regard to their own objectives, financial situation and needs.
An investor should consider the current Product Disclosure Statement for the Fund (‘PDS’) in deciding whether to acquire, or continue to hold, units in the Fund. A Target Market Determination for the Fund is also required to be made (‘TMD’). A copy of the PDS and TMD are available from www.mlcam.com.au or by calling our Client Services Team on 1300 738 355.
Past performance is not a reliable indicator of future performance. Returns are not guaranteed and actual returns may vary from any target returns described in this communication. Any projection or other forward-looking statement (‘Projection’) in this communication is provided for information purposes only. No representation is made as to the accuracy or reasonableness of any such Projection or that it will be met. Actual events may vary materially.
The capital value, payment of income and performance of any financial product offered by any member of the Insignia Group is not guaranteed unless expressly stated in a PDS. An investment in any product offered by any member of the Insignia Group is subject to investment risk, including possible delays in repayment of capital and loss of income and principal invested.
Any opinions expressed in this communication constitute our judgment at the time of preparation and are subject to change. We consider any estimates, opinions, conclusions or recommendations are reasonably held or made at the time of preparation. However, no warranty is made as to their accuracy or reliability (which may change without notice) or in relation to any other information contained in this communication and neither Fairview nor any other Insignia Group member accept any liability for any loss arising from its use. In some cases, information has been provided to us by, or obtained from, third parties. While it is believed the information is accurate and reliable, the accuracy of that information is not guaranteed in any way. This communication is directed to and prepared for Australian residents only.
