Ausbil Global SmallCap Fund Portfolio Managers, Simon Wood and Tobias Bucks, introduce the fund, their investment style and the opportunity global small cap stocks offer local investors.
Jessica Amir: Thanks for your company. I'm Jessica Amir for the Finance News Network, at Ausbil, with the Ausbil Global Small Cap Fund portfolio managers Simon Wood and Tobias Bucks. Welcome to the network.
Tobias Bucks: Hi.
Simon Wood: Thank you.
Jessica Amir: So first up, for those who are unfamiliar with the fund, just give us a quick introduction.
Simon Wood: Well thanks, Jessica. Toby and I manage the fund together. We first met back in 2007 at Barings in London, within the Global Small Cap team there. We think global small caps is a great addition to any diversified portfolio, given its long-term return characteristics and potential, and our aim is to outperform our benchmark, MSCI World Small Caps, and deliver best-in-class returns.
Jessica Amir: And some Aussie investors, you could say, are really a bit unfamiliar with global small caps, so what's the opportunity that you see here?
Simon Wood: So Toby and I are really passionate about the asset class. It's an enormous opportunity set. There's over 4,300 companies within our universe. It's got a very attractive long-term return profile. It's outperformed the large cap indices by about 3 per cent for the last 20 years, and it also exhibits lower efficiency, due to its lower market scrutiny and lower analyst coverage. One of our biggest holdings, The Trade Desk (NYSE:TTD), only has 10 sell-side analysts covering it, and that compares to Google, i.e. Alphabet (NYSE:GOOG), which has 40 analysts covering it. And that really comes to the crux of the opportunity. We're able to find high-quality companies with stronger and longer growth profiles in the lower-efficiency asset class.
Jessica Amir: Thanks, Simon. Now over to you, Toby. Could you tell us about the investment objectives and the style?
Tobias Bucks: Yeah, so we aim to outperform the MSCI World Cap Small Index by over 3 per cent per annum. Our investment style focuses on high-quality companies with improving ESG profiles, and ones that deliver unrecognised growth, and by that, we mean positive earnings revisions that the market hasn't factored in.
Jessica Amir: Thanks. And now can you flesh out the sector composition and also some of the largest holdings?
Tobias Bucks: Yeah, so our largest holdings are The Trade Desk (NYSE:TTD), Vitasoy (HKG:345), and Chemed Corporation (NYSE:CHE). In terms of the portfolio, we have a very balanced portfolio. We've many uncorrelated investments. We don't have any materially large sector bets, although we are overweight software as a service, owing to the ESG profile and the high-quality growth on offer there.
Jessica Amir: Thanks Toby, and what can you tell us about the performance?
Tobias Bucks: Well, we aim to outperform in any market environment, but given the focus on high quality and on unrecognised growth and earnings revisions, we do tend to out-perform most during quarterly reporting periods. And given the fast-growing nature of the universe, the fund is focused on capital returns mainly, and has semi-annual distributions. And since inception, in May 2018 we’ve outperformed the index on a gross basis.
Jessica Amir: And gents, in all the years since investing in global small caps, just take us through some of your most memorable stocks.
Tobias Bucks: So The Trade Desk (NYSE:TTD) is one of the most memorable. It's the niche leader in global online advertising, and the programmatic online advertising market's expected to grow at over 20 per cent in the midterm. Now as the niche leader, we do expect the Trade Desk to outperform, particularly given its dominance in connected TV. Its focus on ESG considerations, particularly surrounding privacy, have laid the foundation for its future growth and enabled it to take market share off Facebook (NASDAQ:FB) and Google. And for me, it's one of the most interesting and compelling ones I've ever seen, because it's so rare you get to find the next Google when it's undiscovered and small, and The Trade Desk is over 219 per cent since we purchased it in June 2018.
Simon Wood: So moving onto a different area of the market, we've seen a huge theme in plant-based products, and specifically plant-based milks. For example, in Hong Kong and Chinese, Tier 1 and Tier 2 cities, we see ongoing strong demand, but in Tier 3 and Tier 4 cities, we only see this demand now starting to accelerate. Vitasoy, which you've seen on the supermarket shelves and in Australian cafes, is one of the market niche businesses in this industry.
Vitasoy has been able to, over long periods of time, improve the efficiency in its manufacturing capabilities, it's been able to widen its geographical range, and improve its product mix. Alongside this, its focus on its ESG considerations and how it embeds that into its business with its unrecognised growth potential, really makes this a very memorable stock for me.
And this is one of the reasons why Toby and I love the asset class, because we get to go out and find these amazing opportunities over and over again.
And since we purchased Vitasoy at the inception of the fund in May 2018, Vitasoy is up over 50 per cent during that period.
Jessica Amir: And just lastly, gentlemen, before we let you go, can you share the outlook for the second half?
Tobias Bucks: This year has seen quite a volatile environment for markets, which has been driven by a deterioration in global manufacturing, somewhat offset by accommodative central bank policy, and a possible resolution to geopolitical concerns. If we look forward into the second half of this year, we think those are going to be the three key drivers of market performance. If we see accommodative central banks improve the global manufacturing outlook, then we do expect the market to post higher highs into year-end.
Jessica Amir: Well thank you so much for your insights into the fund, and thanks for your time. Toby Bucks, Simon Wood, thank you.
Tobias Bucks: Thanks
Simon Wood: Thank you very much.
For more information and to access the PDS, please visit the Ausbil Global SmallCap Fund.