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 – and its average peer in nine of the past 10 calendar years.
Of the 14 funds in the sector with a track record long enough to be included in the study, another three – including the iShares MSCI USA Small Cap UCITS ETF – beat the index in seven of the past 10 years.
Performance of funds vs sectors and indices
Source: FE Analytics
T. Rowe Price US Smaller Companies Equity is headed up by Curt Organt, who looks for attractively valued, 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. He added that this approach allows him to take advantage of valuation anomalies created by extreme swings in investor sentiment while delivering more consistent performance.
In a recent note to investors, he said that while he was keeping an eye on supply chain issues and inflation pressures, made worse by Russia’s invasion of Ukraine, his focus remained on “long-term investment outcomes”.
Data from FE Analytics shows T. Rowe Price US Smaller Companies Equity made 444.8% over the 10-year period in question, compared with gains of 323.6% from its sector and 282.4% from the Russell 2000 index.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
It is worth noting that much of the fund’s outperformance came before Organt took charge in 2019.
ASI Europe ex UK Smaller Companies is the most consistent IA European Smaller Companies fund of the past decade, beating the most common benchmark in the sector – the MSCI Europe Small Cap index – in eight of the past 10 years and its average peer in nine.
It edged out Threadneedle European Smaller Companies, which beat both the index and its average peer in eight of the past 10 years.
ASI Europe ex UK Smaller Companies is headed up by Andrew Paisley, who uses the proprietary “Matrix” screen, developed by colleague Harry Nimmo. This identifies high-quality companies that operate in growing markets and have strong momentum behind them.
“This helps us focus our time and effort, and identify a concentrated list of companies we are happy to hold for long periods,” said Paisley.
“We remain comfortable with the style tilts in the portfolios given what is likely to be a more difficult economic outlook during 2022, and where having pricing power and a strong balance sheet will be important given increasing inflation and geopolitical challenges.”
The fund uses the EMIX Smaller European Companies ex UK index as a reference point, and its tracking error is not expected to exceed 9 percentage points of this benchmark.
ASI Europe ex UK Smaller Companies made 457.4% over 10 years, compared with 285.1% from the MSCI Europe Small Cap index and 278.6% from its sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Janus Henderson Horizon Japanese Smaller Companies topped the IA Japanese Smaller Companies sector for consistency, beating the most common benchmark – split 50:50 between the MSCI Japan Small Cap and Russell Nomura Small Cap indices – in eight of the past 10 years, and its peer group average in six.
Four of the nine funds with a track record long enough to be included in the study beat the composite index in six of the past 10 years.
Janus Henderson Horizon Japanese Smaller Companies invests in the smallest 25% of listed Japanese companies, which its manager Yunyoung Lee expects to benefit the most from a domestic recovery. He is also positioned to take advantage of improving corporate governance standards in the country.
In a note to investors at the end of last year, Lee said that while European and US markets were close to their peaks, the Japanese small-cap market was off by close to 20%.
“This reflects global investors’ low expectations of Japanese equities,” he said. “However, we believe there are several positive catalysts for Japan’s market, including improving corporate governance, robust corporate earnings and cashflows, and the benefits of mild inflation due to changes in domestic investors’ asset allocations.”
The manager also noted this area of the market had become less efficient, due to declining coverage by sell-side analysts.
“Against this backdrop, we believe our investment strategy of bottom-up analysis based on intensive management interviews should give us a competitive edge,” he added.
Janus Henderson Horizon Japanese Smaller Companies made 255.5% over the 10-year period in question, compared with 246.7% from its composite benchmark and 154.5% from its sector.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
| Name | Fund size (£m) | OCF (%) |
| T. Rowe Price US Smaller Companies Equity | 2329.8 | 1.06 |
| ASI Europe ex UK Smaller Companies | 53.5 | 0.96 |
| Janus Henderson Horizon Japanese Smaller Companies | 251.2 | 1.09 |