Small cap head-to-head
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.