US small caps stay safe

US small caps stay safe

Brexit woes may hit global large-caps, but for investors who want a long-term holding, US small caps will be relatively sheltered from the effect of the vote to leave, a fund manager has claimed.

According to Chris Berrier, co-portfolio manager with David Schuster of the $127m (£97m) Brown Advisory US Small-Cap Blend Fund, the Brexit vote has created a “great deal of uncertainty in markets”.

Mr Berrier said: “We are expecting a heightened period of volatility to last for some time. However, we believe the US small-cap landscape will be less impacted fundamentally.

Article continues after advert

“Today, US small-cap valuations – when compared to their large-cap peers - look relatively attractive, and we would expect a premium for secular growth when it is scarce.”

The comments came as the fund marked its three-year anniversary on 8 July delivering strong outperformance since its inception of 8.5 per cent (net of fees on an annualised basis) against its benchmark, the Russell 2000 Index, at 6.7 per cent.

The Dublin-based Undertakings for Collective Investments in Transferable Securities (Ucits) fund aims to provide investors with access to the best US small-cap companies across the growth and value spectrum.

In Financial Adviser’s sister website FTAdviser’s latest CPD-qualifying guide to US small and mid-caps, Jenny Jones, manager of the £1.37bn Schroder US Mid-Cap fund, said it was important to remember long-term investing means more than just three to five years, and for patient investors, putting money away now into small caps can reap rewards over the real long-term.

Compound return (%)Growth of $1 invested in 1926 (US$)
Small stocks1226,433
Large stocks105,390
Government bonds5.5132
Treasury bills3.421
Source: Ibbotson Associates