Posted inAnalysisEmerging MarketsNORDICS

The Finns, the latest converts to EM small caps

Exactly half of the thirty-odd fund selectors attending the event said they have a preference for small caps within the emerging markets space. Only in Norway, there are more fans: six in 10 fund selectors there prefer small over large in EM. Over the past year, EM small cap managers have gradually found a more receptive audience in Finland: the percentage of EM small cap fans has climbed from just 18% in May 2014 to 30% in November, and 50% now.

For William Ballard head of emerging markets equities for Aviva Investors and manager of an EM Small Cap fund, the receptive audience he found in Helsinki must have been a positive surprise. On average in Europe, those who prefer EM large caps outnumber fans of small caps by more than two to one. 

That Ballard had only relatively few fund selectors to convince of the merits of small cap investing in emerging markets might even have been a slight disappointment for him though. Among other things, Ballard mentioned that the investment universe for emerging market small caps covers more than 4000 companies, compared to only 833 companies in the large cap space.

 

Consequently, EM small cap managers have a high active share (Ballard’s active share stands around 97% at the moment). This is an important consideration for Finnish investors. Some 81% of delegates said they use active sghare as a metric in their fund selection process.  

Part of the Bonhill Group.