EAM Global Small Companies Fund Update

EAM Global Small Companies Fund – Quarterly Update

14th Apr 2024

March quarter performance*

The EAM Global Small Companies Fund had strong absolute and relative performance in the March quarter of 2024, as our informed momentum process and momentum itself staged quite a comeback from 2023.

The fund returned just over 18% in Aussie dollar terms, about 1,000 or so basis points better than the index.

At a high level, nearly all of our outperformance came from our intended exposure in the portfolio to informed momentum, the combination of momentum and stock-specific risk from a country and industry perspective.

Where do we see the momentum now?

The strength in the portfolio was broad-based, but on a relative basis, it was led by contributions from holdings in the US, Japan and India.

From a sector perspective, relative performance was led by information technology and industrials.

While global smalls in general have lagged large caps to start the year, from a stock picker’s perspective, we’re finding a tremendous amount of opportunity in global small caps. But you have to know where to look to find those opportunities, and we’re finding most new momentum is the United States.

We’re also seeing very strong continuation of momentum and trend in Japan, India and Taiwan. India is a little bit different, we’re seeing momentum across all sectors and industries there. But from a Japan, Taiwan, and US perspective, we’re really seeing a lot of opportunity being driven by artificial intelligence. More specifically within artificial intelligence, we’re seeing a broadening out from just technology-focused beneficiaries to more industrial beneficiaries – everything from even some ink companies, to server rack companies, the HVAC companies – everything that’s benefiting from the necessary build-out of infrastructure to house these massive compute loads that come with AI.

For small caps in general, while the returns have been muted versus large caps, from a stock-picking perspective in global small caps, there’s a tremendous amount of opportunity.

Where to from here?

It’s natural to ask after a really good performance quarter, you know, what’s in store for the future? And in fact, momentum had one of its best quarters in the history of capital markets in the March quarter of 2024.

It’s only natural to question, you know, where do we go from here? And according to our research, we looked at both non-US and US long-only momentum – what happens after the top 20 strongest quarters of all time. And more often than not, momentum continues to outperform over the next one, three and five-year time frames.

Adaptable at heart

Momentum doing extraordinarily well doesn’t necessarily portend bad things to come for momentum in our process specifically.

There are always uncertainties when we look forward, and certainly 2024 and the balance of the year is going to have many global uncertainties to get through.

However, we take confidence in our approach and our process because at its heart, it’s adaptable. So we’ll go wherever the strength is, and that’s what gives us confidence no matter what may come, that we’ll find trend and exploit it.

Click here to find out more about the fund.   |   Click here to read the previous update.


* The text has been edited for clarity.



The document contains general information only. Reference to either individual securities or other investments should not be considered as investment advice. We strongly encourage you to obtain professional advice before making an investment in securities that have been mentioned. Documents you should consider prior to making an investment could include the relevant Product Disclosure Statement and the accompanying Target Market Determination. If you would like further information on financial products that SG Hiscock & Company Ltd (AFSL 240679) is the investment manager for, contact the Client Services team on 1300 133 451, visit the website www.sghiscock.com.au or contact your financial adviser.  Any investment is subject to risk, including possible loss of income or capital invested.