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WHY AUSTRALIAN MICROCAPS CAN PERFORM IN TOUGH MARKETS

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Like many other Australians, your equities portfolio most likely consists of many blue chip stocks which populate the ASX200. While these stocks are known for their defensive capabilities and long term conservative growth prospects, they are heavily driven and affected by macroeconomic trends. For investors who wish to diversify into stocks that are less focused on factors external to the company at hand, Microcaps may be a suitable option.

In Australia Microcaps are defined as companies which are trading at a market capitalisation of below $250 Million. The sector holds around 2000 stocks and is known for its risk/reward characteristics and its tendency to be less affected by macro-economic factors than other market sectors. Due to their relative size and inherent growth drivers, Microcaps often have company specific reasons for growing. Therefore, Microcaps can provide investors with growth that is not necessarily dependent on prevailing economic conditions on which ANZ or Woolworths would be dependent.

Due to the size and growth prospects of microcap stocks, they often out-perform the benchmark indices. This is because Microcap companies can have fast growing earnings as their products and services are in the early life stages or they may be either expanding into new geographic markets or winning market share from other competitors.

According to Microcap specialist fund manager Carlos Gil, Chief Investment Officer at Microequities Asset Management,  “due to large divergences in the quality of companies research and due diligence are essential in this asset class and we always recommend that if an investor does not have the time, skill set or necessary resources to undertake research, they should use a specialised Microcap fund manager. ”

Microequities flagship fund – the Deep Value Microcap Fund – has returned a +26.67 % Compound Annual Return (after all fees) since inception in 2009, it has outperformed the market every year since inception and has a 5-star Morningstar Rating as at 31/08/2015 *. 

Value of $100,000 Invested at Inception

as at 30/09/2021

For more information about Microequities or to request an information package, please click below