Standard & Poor’s Fund Services today released ratings for funds included in the 2011 small-cap sector review. Overall, the peer group for Australian smaller companies funds remains highly competitive, with the majority of offerings delivering on their investment objectives.
“The median manager in the group returned close to 5% per year, after fees, ahead of the ASX Small Ordinaries Index over the past three years. It highlights the success of active management within the sector,” said John Huynh, analyst at S&P Fund Services.
There were 45 headline funds in the review cycle, which included micro-cap, mid-cap and traditional small-cap strategies. S&P upgraded seven funds and downgraded two. There were five new funds and three withdrawals.
The Aviva Investors Professional Small Companies Fund was upgraded, and is the only five-star offering in the peer group. This reflects our very high conviction in the capabilities of the team and the effectiveness of its investment approach. A healthy track record, combined with a competitive fee structure, make the fund attractive to retail investors. Other funds that were upgraded include NovaPort’s Small Companies and Microcap funds, the Perennial Value Smaller Companies Trust, the Ironbark Karara Australian Small Companies Fund, the Ausbil Microcap Fund and the BT Midcap Fund.
While there is just one five-star fund, quality across the peer group remains high, as shown by the number of four-star ratings. When rating high-quality strategies such as the BT Smaller Companies Fund, and the Eley Griffiths Group Small Companies Fund, our highest conviction was primarily tempered due to concerns about capacity, and the risks associated with managing large amounts of money within the sector.
The Invesco Australian Smaller Companies fund was downgraded to four stars. While remaining a quality offering, our rating action reflects a number of factors including broader peer-relative assessment and an overall reduction in conviction.
New funds rated in this review include the Glennon Capital Small Companies, Concord Discovery Fund, Grant Samuel Tribeca Australian Smaller Companies, OC Dynamic Equity and Premium Equity funds, and LSC Australian Resources Hi-Alpha.