FUND MANAGEMENT
Small and mid caps an overlooked sector
Mid-and small-cap funds are hugely important contributors to potential returns
With R7.3bn under management, mid-and small-cap funds represent barely 2% of retail investments into SA equity. The neglect of this sector is certainly a missed opportunity. Over the past two decades, mid-cap companies have generated 2.7% a year more than the top 40 index and small caps 2.3%. Warren Jervis, portfolio manager of the Old Mutual Mid & Small Cap unit trust, argues that these two segments are hugely important contributors to potential returns. They often provide uncorrelated returns to the top 40 shares, not least because there is often more of a domestic orientation. It is an area in which index trackers have little presence, as active fund managers have been able to add value. It is 20 years since Old Mutual’s fund was launched to the public. It has had a return of 15.2% a year, compared with 12.4% from the peer group. This excess return can be achieved by spotting quality companies — preferably those overlooked by the market. Clients might still equate small caps with...
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