BNP IP: Größere Chancen durch EM-Small-Caps

Despite headlines of slowing growth in emerging markets, global emerging markets small-caps have outperformed most major equity indexes year-to-date. In this piece, Rick Wetmore, CFA Deputy Chief Investment Officer from our Global Emerging Market (GEM) Equities team examines the current state of GEM small-cap equities. The team presently manages our GEM equity all-cap growth capability, a frontier strategy, and has recently launched our GEM small-cap equity strategy.

THANK YOU, RICK, FOR BEING WITH US TODAY. IF YOU WOULD, PLEASE TELL US ABOUT THE SMALL CAPS YOU MANAGE AND HOW YOU DEFINE THEM.

We manage a GEM small-cap strategy benchmarked to the MSCI EM Small Cap Index. In our view, small cap companies generally have a market capitalization of less than $2.5 billion at time of purchase. We believe that an active approach in emerging market (EM) small-caps offers investors numerous potential benefits.

WHAT ARE SOME WAYS THAT GLOBAL EMERGING MARKET SMALL-CAPS DIFFER FROM LARGE CAPS AND WHAT ADVANTAGES DO THEY OFFER?

EM small-caps offer investors greater opportunity for outsized returns due to a broader, more inefficient universe, attractive risk reward characteristics and diversification through more exposure to domestically-oriented companies.

The EM small-cap space has a greater number and diversity of companies than the EM index. The MSCI Emerging Market Small Cap Index, for example, includes close to 1,800 stocks, while the standard MSCI Emerging Market Index includes a more concentrated 833 stocks.

Information on EM small-cap stocks is much less readily available than for their EM large-cap counterparts. Analyst coverage of small-cap stocks is significantly lower than that of developedmarket or larger EM companies. As of May 29, 2015, the median number of analysts covering a stock in the EM small cap universe was three. This compares with 14 for the MSCI Emerging Markets Index and 18 for the S&P 500. 

This inefficient universe provides opportunities to achieve strong, uncorrelated performance from the EM small-cap asset class. Returns from EM small-cap stocks have outpaced the average returns from the broader EM universe, over the last 1, 3, 5 and 10 year periods as of the end of June 2015, as well as for 7 of the last 10 calendar years.

Over the past decade, EM small-cap equities have not only delivered better absolute returns but have also provided higher risk-adjusted returns than the broader EM universe.

Das vollständige Interview im pdf-Dokument

Ein Quartalsausblick zu Indien im pdf-Dokument