Trends Investment Summit
Global Small-Caps portfolio manager Maarten Vankan gave a presentation with the title “Small-caps, a factor that matters”, detailing three important themes related to small-cap investing and our view thereon. These themes were illustrated by three investment cases from the Kempen Global Small-cap strategy. Incidentally, two of these investment cases have been discussed in previous editions of our quarterly, and can be found here (Del Frisco) and here (Kronos), whereas the third (Brunswick) is discussed in this quarterly.
First of all we explained why we believe adding small-caps to your portfolio is a great idea from a risk/reward perspective. Small-caps historically performed better than large-caps, by approximately 2% per annum over the long term, which is also known as the small-cap premium. On top of this we explained that the probability of losing money in small-caps has historically been lower for small caps than for large caps, in the case of investment horizons longer than three years.*
Secondly we discussed why we think small-cap investing should be implemented with an active manager. Small-cap stocks are generally under-researched and hence a less efficient part of the equity market. This allows active managers to add value through stock selection. Kempen Capital Management has a strong track record managing active small-cap portfolios. A great example is our Kempen Orange Fund which on average has outperformed its GPRDSC-index by about 2% per annum since itslaunch in 1991.
Last but not least, the small-caps universe is perfectly suited to implement environmental, social and governance (ESG) factors and to truly engage with companies. Investors have better access to management teams, which means that engaged shareholders are better able to have an impact on the strategy of a company. An additional benefit is that portfolio managers are better able to understand the quality and the characteristics of management team members, as well as their interaction as a team. This helps to predict the actions management teams will make in the future, particularly in more uncertain periods of time.
The day ended with a dinner during which the Morningstar awards for Belgium were awarded. All in all, we look back on a very good event and already look forward to next year’s edition!*Source: Kempen, Kenneth French US return data, 1946-June 2017, 1946=100. Large-caps defined as the 30% stocks with the largest market capitalisation, small-caps as the bottom 70% of stocks. This approach proxies MSCI definition. From http://mba.tuck.dartmouth.edu/pages/faculty/ken.french/, June 2017.
This document is prepared by the fund managers of Kempen (Lux) Global Small-cap Fund (‘the Fund’),managed by Kempen Capital Management N.V. ("Kempen‘’). The views expressed in this document may be subject to change at any given time, without prior notice. Kempen has no obligation to update the contents of this document. As asset manager Kempen may have investments, generally for the benefit of third parties, in financial instruments mentioned in this document and it may at any time decide to executebuy or sell transactions in these financial instruments. The information in this document is solely for your information. This document should not be considered to constitute an investment recommendation and it is not intended as an offer or a solicitation to buy or sell any financial instrument mentioned in this document. This document is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The views expressed herein are our current views as of the date appearing on this document. This document has been produced independently of the company and the views contained herein are entirely those of Kempen.