Small cap (smaller companies)

Asia ex-Japan smaller capitalisation companies are of interest because they are typically less well-researched, offering scope for material pricing inefficiencies. The lower the market capitalisation, the lower the percentage of stocks covered by analysts. Fewer than 50% of listed Asia ex-Japan companies with a market cap of less than USD1bn have any sell-side research coverage. The average number of analysts per company has also been falling.

Increased passive investing, regulatory change and investor preference for daily liquidity are causing the amount of research per company to drop at a time when the stock universe is expanding. This presents a growing opportunity set for an active manager to exploit, offering patient investors the potential reward of a better outcome than regional equity index benchmarks both in terms of return and volatility of returns.

Our investment process has been developed as a result of our own research and experience with the asset class. We focus on stock selection and emphasise managing the risks specific to the investment strategy through a framework of risk management limits.