Fund Manager Briefing: Andrew Neville, Portfolio Manager, Global Smaller Cap Equities Featured
Lipper's Jake Moeller presents highlights of a presentation by Andrew Neville, Portfolio Manager, Global Smaller Cap Equities, June 4, 2014.
"First, furthest, and fastest" might sound like a variation of the Olympics motto, but it is in fact the small-cap equity (SCE) mantra of fund manager Andrew Neville.
advocates SCE investing with considerable gusto and some compelling facts.
The bases of his
mantra are that SCEs rise first among all equities in a recovering economic cycle, they rise furthest, and in the first 12-24 months following an economic downturn they rise considerably faster than large-cap stocks.
points out that this is also true in reverse as you approach within nine months of an economic decline, but he
argues that good active stock selection can mitigate the relative downside.
Mr. Neville has been with Allianz 15 years and now presides over the SCE franchise.
Since May 2010 SCEs had been run by one team in San Francisco, but this resulted in a U.S.-centric bias in the overall portfolio.
Now the fund is run by four regional teams in San Francisco, Frankfurt/London, Tokyo, and Hong Kong.
Each team acts with a high degree of autonomy, with their influence in the overall portfolio being weighted by the relative weight of each region in the MSCI Global Smaller Companies
benchmark (currently U.S. 58%, Europe 24%, Japan 11%, and Asia 7%).
With each regional team running its own portfolios, it passes on its high-conviction ideas into the global portfolio.
This results in a 180-stock portfolio with 95% active share and approximately 3% tracking error.
is primarily there in a risk-management role to ensure that no factor, style, or currency risks get above 20% of the portfolio.
believes the SCE field is so fertile for active stock-pickers because, by the Allianz
definition of small-cap (...
Given that we are now five years into the current stock market cycle and, according to
, global SCEs are "fastest" in the 12-24 months after a downturn, what are the implications for a potential investor who has missed out on much of the action?
team are confident they can find SCE stocks that are likely to grow considerably.
Last year they had sold all exposure to SE Asia because of the effects of tapering, but they have re-entered the region via an Indonesian consumer stock.