Finding profitable and sustainable small/mid cap companies is a difficult enough task in the widely covered developed markets so for the under-researched emerging market area this provides a host of other challenges.
A limited number of fund managers have cracked the secret to generating strong returns in the largely untapped market of emerging market small cap equities.
Only 18 fund managers running Ucits funds currently have a three-year track record in this sector with just over half (10) managing to outperform the MSCI EM (Emerging Markets) Small Cap index’s rise of 33% over that period till the end of January 2018.
Below are the fund managers that have achieved the highest returns in this most opaque of markets.
3. Antti Raappana – Danske Invest
- 3-year returns: 39.9%
- Funds: Danske SICAV-SIF Emerging and Frontier SMID/DI Sicav Emerging and Frontier Markets
Kicking off our ranking in third place is Citywire + rated Antti Raapana of Denmark-based group who runs its emerging market and frontier market fund.
Despite focusing on mid-to-small cap companies, the fund holds emerging market giants such as Tencent Holdings, Alibaba Group and Tata Global Beverages.
However, it has a diverse portfolio of nearly 180 stocks with Asia being its largest regional allocation at 47% - India and Hong Kong account for 11% each of the fund.
Among its top holdings are Indonesian electricity supplier Pt Cikarang Listrindo Tbk and Indian broadcast network Tv18 Broadcast.
2. James Grotto/Richard Sennitt/Matthew Dobbs - Schroders
- 3-year returns: 42.5%
- Fund: Schroder ISF Global EM Smaller Companies
In second place is a trio of fund managers from UK fund house Schroders. Grotto, Sennitt and Dobbs run a portfolio with under half the holdings (75 names) of their Danske counterpart Raappana and have a higher allocation to Asia at 69%.
Consumer discretionary is the fund’s largest sector exposure at 30% followed by industrials at 19% and financials at 10%.
Its top holdings include Taiwanese beverage and bakery group Gourmet Master, Cyprus-based bank TCS Group Holding and Korean manufacturer Mando Corporation.
1. Amit Mehta – JPM
- 3-year returns: 45.8%
- Fund: JPM Emerging Markets Small Cap
Topping the ranking is Citywire + rated Amit Mehta of JP Morgan Asset Management who runs by far the largest fund among this sector’s top managers at $2.1 billion.
Mehta has been running the fund since May 2012 and was joined by co-manager Austin Forey in February 2016.
His largest country allocations are toward China (15.4%), Taiwan (14.3%) and India (12%). Of note, however, is that his largest overweight is toward South Africa at 10.5%, almost double that of the benchmark.
Like his counterparts consumer discretionary and financials are his favored hunting grounds and his largest holdings include Central and Eastern European software solutions group EPAM Systems and South African healthcare retail firm Clicks Group.