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CORONATION SMALLER COMPANIES FUND
Of the more than 1 400 local unit trust funds available to retail investors, there are just seven funds that focus on the small and mid-cap sector of the JSE. Leading the pack, and with a rating of five PlexCrowns to show for it, is the Coronation Smaller Companies Fund, managed by Alistair Lea.
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To the end of the 3rd quarter 2021, the fund was first among its peers for performance over 12 months (65.71% against its peer average of 48.43%), three years (16.47% against 7.86%), five years (9.47% against 3.14%) and 10 years (11.10% against 8.50%), according to data provided by ProfileData.
According to its fact sheet, the fund is fully invested in companies outside the 40 largest companies on the JSE, across the primary equity sectors of resources, industrials and financials. It was launched in April 1997 and currently holds assets of R306 million.
As of 30 September 2021, its top five holdings were: Spar Group (6.0%), RMI Holdings (5.4%), Distell Group (4.8%), Metair Investments (4.7%), and Aspen Pharmacare Holdings (4.5%).
Its benchmark is a market-cap weighted composite of the JSE Mid & Small Cap Indices.
The fact sheet says you should consider investing in the fund if you are building wealth and:
• Wish to benefit from the potential growth in medium-size and small companies;
• Want to diversify your investments to include specific exposure to companies outside of the top 40 largest listings;
• Accept the inherent volatility in investing in less liquid shares;
• Want to hold the fund as one of multiple funds in your investment portfolio. Personal Finance asked Lea how he went about managing the fund.
What is your investment philosophy when picking smaller-cap shares, and what do you look for in a company?
Our investment philosophy is centred on owning quality companies, and if possible, quality companies that can grow. We look for:
• Good management.
• Good fundamentals.
• Cash flow conversion.
• Decent returns (ROE).
• A balance sheet that does not present excessive risk.
• The ability to grow earnings in real terms.
• Visibility and predictability of the earnings stream.
