T. Rowe Price US Smaller Companies Equity is the most consistent IA North American Smaller Companies fund of the past decade, beating the most common benchmark in the sector, the Russell 2000, in eight of the past 10 calendar years.
It also beat the sector average in the same number of 12-month periods.
Another two funds – Brown Advisory US Smaller Companies and GS US Small Cap CORE Equity Portfolio – beat the Russell 2000 in seven of the past 10 calendar years.
Performance of funds vs sector and index
Source: FE Analytics
T. Rowe Price US Smaller Companies Equity is headed up by Curt Organt. Organt takes a style-agnostic approach, whether that is “out-of-favour companies with strong potential for improvement, or companies that may appear fully valued, but whose long-term growth potential is underappreciated”.
“Identification of a value creation catalyst is key,” said Organt. “Overall, we remain modestly overweight high-quality companies that compound their earnings. We also look for select investments in ‘deeper-value’ opportunities – those stocks that we believe are significantly undervalued – and hold a number of income-oriented dividend growth companies.”
The dominant positions in the portfolio from a sector point of view are industrials and business services, information technology, financials, and healthcare, all accounting for more than 10 per cent of assets.
In his latest note to investors, Organt said: “We continue to invest in select companies across various industries where we feel valuations may underestimate the sustainability of their growth or turnaround potential. This included boosting positions within commercial services and supplies, software, IT services, and oil & gas and consumable fuels.”
T. Rowe Price US Smaller Companies Equity made 377.9 per cent over the period in question compared with gains of 279.18 from its sector, 258.28 per cent from the Russell 2000 index and 308.48 per cent from the S&P 500.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The onshore version of the fund is £55m in size and has an ongoing charges figure (OCF) of 1.12 per cent.
However, investors should bear in mind that Organt has only been the manager of the fund since March last year.
Brown Advisory US Smaller Companies is headed up by lead manager Christopher Berrier and deputy George Sakellaris. They aim to invest in a diversified portfolio of high-quality businesses with sound management teams and competitive advantages in order to produce an above-average growth rate over a full market cycle.
“We adhere to an investment process and valuation discipline that benefits from a unique investment network of venture capital, private equity and firm relationships, which gives us a potential informational advantage,” said a statement from the group.
The fund made just under 30 per cent last year, with Berrier and Sakellaris saying the drop in the US small-cap market in 2018 allowed them to take advantage of a number of opportunities their analyst team had been building up for some time.
“In short, a number of stocks finally hit price points where we believed the risk/reward dynamic actually favoured our shareholders,” they explained.
“This was a buying moment that we were able to take advantage of because of the portfolio’s solid downside protection, which is driven by a focus on quality, diversification and valuation discipline. Our conservatism simply allows us to lean against the wind during times of market stress.”
Brown Advisory US Smaller Companies made 346.55 per cent over the period in question.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The $524m fund has an OCF of 0.88 per cent.
The GS CORE Equity Portfolios make use of ‘Big Data’ with a human overlay. They aim to identify high-quality, well-run companies and fundamental mispricing, while benefiting from swings in sentiment and uncovering new themes and trends.
A statement from Goldman Sachs said the US small cap version in the range is designed for investors “who are looking to access a US small-cap equity portfolio possessing the same style, sector, risk and capitalisation characteristics as the benchmark but positioned to outperform through strong underlying stock selection”.
The fund is well diversified, with close to 400 holdings. Its top-10 accounts for just 8.4 per cent of assets.
GS US Small Cap CORE Equity Portfolio made 300.97 per cent over the 10-year period in question.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
It is $278.6m in size and has an OCF of 0.81 per cent.