Small cap head-to-head

Finweek English Edition - - UNIT TRUSTS -

THE RE­CENT SELL-OFF in global equity mar­kets has pre­sented op­por­tu­ni­ties for in­vestors in JSE-listed small caps who have a longer term in­vest­ment time­frame. You only have to go and look at liq­uid­ity graphs and the dif­fer­ence be­tween the bid and of­fer spread to see smart in­vestors with cheeky bids are find­ing will­ing sell­ers of qual­ity coun­ters. With that in mind, Finweek be­lieves now might be a smart time for in­vestors to get in on the small cap game with an in­vest­ment in one of the spe­cial­ist unit trust funds.

For the pur­poses of this ex­er­cise we’ve put the RMB Small/Mid-Cap and Stan­lib Small Cap funds head-to-head to give read­ers some op­tions. Both have been ex­ten­sively cov­ered by the me­dia over the past three or four years – but for very dif­fer­ent rea­sons. The RMB of­fer­ing has con­sis­tently been at the top of the rank­ings, while the Stan­lib fund has been through a very up and down five-year pe­riod.

Both funds are clas­si­fied as be­ing high-risk in­vest­ments and suit­able for in­vestors with a five-year in­vest­ment time­frame. You can get the RMB of­fer­ing with a debit or­der of R300/month, while it’s R500/month at Stan­lib. Both funds have a sim­i­lar to­tal ex­pense ra­tio of 1,7%, but where RMB makes a dis­tri­bu­tion twice a year Stan­lib de­clares a sin­gle dis­tri­bu­tion in De­cem­ber, with the for­mer giv­ing a slightly bet­ter yield of around 1,8%.

As the at­tached ta­ble shows, while both funds talk about “small caps” there are a num­ber of size­able and rep­utable busi­nesses in their port­fo­lios. In fact, there are no scratchy AltX coun­ters in the top 10 of ei­ther port­fo­lio at the end of the past quar­ter.

What’s ap­par­ent from these two port­fo­lios is that while Stan­lib’s Shawn Stock­igt is still re­build­ing his port­fo­lio, Evan Walker is con­fi­dent to take very big po­si­tions on the likes of Pi­o­neer and Spar. Ob­vi­ously, that comes with some risk, but there’s also great re­ward. And if Pi­o­neer can get back to its div­i­dend-pay­ing ways that will aid long-term re­turns.

With Spar and Life Health­care both be­ing solid div­i­dend pay­ers, we con­tinue to lean slightly to­wards RMB’s port­fo­lio. While you may lose hav­ing some cap­i­tal tied up in the small and mid-cap mar­ket over the short term, you’re at least scor­ing some­thing on the div­i­dend front.

It’s not of­ten Finweek will take a view that a man­aged unit trust prod­uct will out­per­form a low-cost ex­change-traded fund, but if you have a seven-year time­frame to save for a first year of univer­sity for your child, ei­ther of these prod­ucts stuck along­side the Fundisa of­fer­ing will prob­a­bly do the trick.

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