Small-cap managers look to firms with overseas expansion plans
Companies such as Afterpay and A2 Milk are boosting the fortunes of small-cap funds Ophir and Clime thanks to their choice to expand the business overseas.
Ophir manages the small-cap Ophir Opportunities fund while Clime manages the Clime Smaller Companies fund.
Both firms said their small-cap funds had benefitted from seeking out those companies with overseas expansions plans.
Jonathan Wilson, portfolio manager at Clime, said: “If you have a retail product and can control the brand then you have the potential to take that to offshore markets especially for technology companies and these companies are executing that well.
“That is something we consider early on when looking at a company, whether expansion is part of their long-term strategy.”
George Chirakis, chief executive of Ophir, said: “We look for companies which are going offshore and growing their brand globally. Offshore they can sell their goods and services to billions of consumers, not just the 25 million in Australia.
“There used to be a real domestic focus for companies in Australia but technology is making it easier than ever for them to go overseas. Technology companies, in particular, are scalable and able to grow quickly.”
Ophir recently put together a report entitled ‘Offshore Growers: Why a new breed of Australian companies is taking on the world – and winning’ which examined how these type of companies had capitalised on their worldwide potential.
Factors which had helped companies grow overseas included the signing of free trade agreements, technology such as cloud computing, social media and a shift by companies to organic growth.
Examples of small-cap companies which had gone on to have success overseas included buy-now, pay-later company Afterpay which expanded significantly into the United States and dairy producer A2 Milk which was founded in New Zealand and was now available in Australia, United States, United Kingdom and China.
Afterpay was noted as one of Australia’s recent success stories with shares rising more than 1000% over the last three years.
Performance of A2 Milk and Afterpay over three years to 30 September, 2019.
AUTHOR
Laura Dew
Recommended for you
The “experiment” away from vertical integration has been a mistake, according to Clime’s Michael Baragwanath, and Clime is positioning to benefit via advice and fund manager acquisitions.
JP Morgan Asset Management has identified Australia as an “emerging growth market” as it seeks to double its assets under management in the Asia-Pacific region in the next five years.
Australian Ethical funds under management were $14.3 billion at the end of September, with its investment division seeing inflows return after outflows in the previous quarter.
Record flows into iShares ETFs helped BlackRock’s assets under management reach US$13.5 trillion in the third quarter, but it reported outflows from the APAC region.
