20 October 2021
It is widely known that traditional Australian equities portfolios are stacked with the country’s top 100 stocks, yet there are more than 2,000 other smaller companies to invest in.
In this paper, we review the performance of active managers in the Australian Small Cap sector. Historically, active management has consistently delivered outperformance as the opportunity set presented by the sector allows the fund manager to demonstrate both their stock selection and portfolio construction skill. An asset allocation decision on the viability of a small cap allocation based purely on analysis of the benchmark returns, ignores the demonstrated alpha opportunity available for investors over time.