In the ongoing debate between active and passive funds management, investors are tasked with identifying their preferences for risk, return, costs, and flexibility.
But within the small cap and micro-cap universe, an active management approach is the obvious answer, according to Ausbil’s Andrew Peros.
In its January performance update, Ausbil’s Australian SmallCap Fund and MicroCap Fund both demonstrated superior performance, surpassing their benchmarks across six-month, one-year, and three-year returns.
Speaking recently on an episode of Relative Return, Mr Peros outlined the firm’s approach which includes engaging in deep-dive research, meetings with company stakeholders, and even ex-employees, to gain insights into corporate culture and future prospects of the firm it’s investing in.
According to Mr Peros, this active strategy allows the firm to tap into a broader segment of the market than a passively managed fund could aspire to unlock.
“We genuinely believe in active management, particularly in the small-cap universe,” he told InvestorDaily.
Namely, Ausbil keeps its research in-house so that it can make “well informed decisions”.
“We’re constantly hitting the road, shaking hands with management teams.
“I mean, we even go as far as trying to tap into ex-employees and you’re not going to really get that value add from a passive fund or a passive investment. So that’s where we really like to get the edge.”
He added: “You’re just not going to get that with a passive investment.”
Mr Peros highlighted the value of connecting with former employees for “amazing” insights, though acknowledged that active fund managers may encounter occasional “bad news” in the pursuit of such information.
“If you are able to filter through some of the noise and filter through some of the bad news, you can really build a great picture,” he said.
“And [in] assessing the culture of companies, you often get that from employees, both current and ex-employees.”
This, Mr Peros said, is a great forward-looking indicator of where a company is heading.
Research released earlier this month by Natixis Investment Managers (IM) similarly discovered that markets now favour active managers.
Namely, 75 per cent of fund managers said that active will be essential to finding alpha in 2024.
Natixis IM underscored a resurgence in active investments as market dynamics shifted, revealing that 58 per cent of managers reported that active investments on their platforms outperformed their passive offering, marking a significant departure from a decade dominated by low interest rates, minimal inflation, and passive strategies.
“Should recession fears be realised, not only do 61 per cent of fund managers think it will show the inadequacies of passive investments, but 53 per cent also think investors who rely solely on passive are likely to learn some hard lessons,” the global asset manager said.
