Equity Trustees re-opens small caps fund

Equity Trustees is to re-open its EQT Small Companies Fund to retail investors following an 18 per cent growth in the S&P/ASX Small Ordinaries Accumulation Index since the fund’s closure in October.

The offering was closed in line with a commitment by fund manager SG Hiscock, which manages the fund, to maximise returns by capping the fund at less than 1 per cent of market capitalisation of the index.

Harvey Kalman, chief investment officer at Equity Trustees says additional retail capacity has also been created by the payment of a “very very large” distribution to unit holders in June, not all of which was reinvested.

The small caps fund will now accept $10 - $15 million in new retail fund applications, bringing total retail funds under management to $50 million.

Kalman says “staying just under 1 per cent” of market capitalisation gives the group the ability to choose the right number of stocks while holding minimal cash, and to trade in or out of those stocks without any liquidity problems.

He says trading in or out of positions becomes more difficult as a fund gets larger, because of the lower liquidity of small companies.

The EQT Small Companies Fund has outperformed the index by 24.6 per cent since its closure in October, when it held a total $380 million in funds under management.

Since inception in June 2001, it has delivered an annualised total return of 35.4 per cent per annum and also has the best three- year performance for all Australian equity funds with 36.65 per cent.