{"id":3048,"date":"2025-05-20T01:16:41","date_gmt":"2025-05-20T01:16:41","guid":{"rendered":"https:\/\/tat.capital\/?p=3048"},"modified":"2025-07-15T01:27:21","modified_gmt":"2025-07-15T01:27:21","slug":"five-reasons-why-you-should-consider-investing-in-a-global-small-companies-portfolio","status":"publish","type":"post","link":"https:\/\/tat.capital\/?p=3048","title":{"rendered":"Five Reasons Why You Should Consider Investing in a Global Small Companies Portfolio"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"3048\" class=\"elementor elementor-3048\">\n\t\t\t\t<div class=\"elementor-element elementor-element-da2a2c8 e-flex e-con-boxed e-con e-parent\" data-id=\"da2a2c8\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-b7686a4 elementor-widget elementor-widget-heading\" data-id=\"b7686a4\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Five Reasons Why You Should Consider Investing in a Global Small Companies Portfolio<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-c5597c1 hfe-post-info-layout-inline elementor-widget elementor-widget-post-info-widget\" data-id=\"c5597c1\" data-element_type=\"widget\" data-widget_type=\"post-info-widget.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<ul class=\"hfe-post-info-inline hfe-post-info-items hfe-post-info\">\n\t\t\t\t\t<li class=\"hfe-post-info-item elementor-repeater-item-aaae468 hfe-post-info-inline-item\" itemprop=\"datePublished\"> \n\t\t\t\t\t\t\t<a href=\"https:\/\/tat.capital\/?m=20250520\">\n\t\t\t\n\t\t\t\t\t<span class=\"hfe-post-info-text hfe-post-info__item hfe-post-info__item--type-date\">\n\t\t\t\n\t\t\t\t\t\t\tMay 20, 2025\t\t\t\t\t<\/span>\n\t\t\n\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/li>\n\t\t\t\t<li class=\"hfe-post-info-item elementor-repeater-item-4d89a1f hfe-post-info-inline-item\"> \n\t\t\t\n\t\t\t\t\t<span class=\"hfe-post-info-text hfe-post-info__item hfe-post-info__item--type-time\">\n\t\t\t\n\t\t\t\t\t\t\t1:16 am\t\t\t\t\t<\/span>\n\t\t\n\t\t\t\t\t<\/li>\n\t\t\t\t<\/ul>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-51c96c2 elementor-widget elementor-widget-text-editor\" data-id=\"51c96c2\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\"><span style=\"margin: 0px; padding: 0px; font-weight: 600;\">Key Insights<\/span><\/p><ul style=\"margin-bottom: 0px; margin-left: 0px; padding-block: 5px 0px; padding-inline: 20px 0px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400; text-align: center;\"><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">Australian investors\u2019 propensity to allocate capital into domestic small caps is much greater than global small caps. This is despite the evidence for a superior \u2018small cap effect\u2019 in the global equity markets.<\/li><\/ul><ul style=\"margin-bottom: 0px; margin-left: 0px; padding-block: 5px 0px; padding-inline: 20px 0px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400; text-align: center;\"><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">Global small caps have a number of unique attributes that appear structural in nature, and importantly, offer longer term diversification benefits for Australian investors within a global equity portfolio.<\/li><\/ul><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\"><span style=\"margin: 0px; padding: 0px; font-weight: 600;\">Introduction&nbsp;<\/span><\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">The \u2018small cap effect\u2019 &#8211; where small capitalisation companies (with a market cap of US$500 million to US$5 billion) outperform the large capitalisation companies over time &#8211; is a widely accepted anomaly in global capital markets.<\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">In their seminal paper, Professors Fama and French concluded the out-performance of small caps over large caps (i.e. the \u2018small cap effect\u2019) was due to an element of risk that is unique to small caps. In other words, investors are compensated for undertaking additional risk when investing in companies with a relatively small market capitalisation. Other empirical studies have also demonstrated that smaller companies have higher rate of earnings growth than large caps.<\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">In the most recent decade, the \u2018small cap effect\u2019 has been strongly evident in the global equity markets. Importantly, the presence of the \u2018small cap effect\u2019 is not the result of just one or two outlier years of out-performance.<\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">For example, in the last 10 years and on a rolling one-year basis, global small caps outperformed global large caps 60 percent of the time. Over three and five-year rolling periods, global small caps outperformed global large caps 74 percent and 89 percent of the time, respectively.<\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">Despite the high certainty of global small caps outperforming global large caps over three to five year periods, Australian investors have been reluctant to allocate capital outside the global large caps and global emerging markets within their equities portfolio.<\/p><p style=\"margin-bottom: 15px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400;\">An allocation to global small caps can:<\/p><p style=\"margin-bottom: 0px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400; text-align: center;\"><span style=\"margin: 0px; padding: 0px; color: inherit;\"><\/span><\/p><ul style=\"margin-bottom: 0px; margin-left: 0px; padding-block: 5px 0px; padding-inline: 20px 0px; color: rgb(136, 136, 136); font-size: 16px; font-style: normal; font-weight: 400; text-align: center;\"><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">substantially increase the investment opportunity set and potential for adding alpha,<\/li><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">complete the &#8216;capitalisation range\u2019 of an international portfolio,<\/li><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">provide demonstrated added diversification benefits, and<\/li><li style=\"padding-block: 5px; padding-inline: 0px; list-style: inherit; text-align: left;\">offer relative valuation advantage over large caps.<\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-c481ab0 elementor-widget elementor-widget-button\" data-id=\"c481ab0\" data-element_type=\"widget\" data-widget_type=\"button.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t<div class=\"elementor-button-wrapper\">\n\t\t\t\t\t<a class=\"elementor-button elementor-button-link elementor-size-sm\" href=\"https:\/\/tat.capital\/wp-content\/uploads\/2025\/06\/gbl-sm-caps.pdf\">\n\t\t\t\t\t\t<span class=\"elementor-button-content-wrapper\">\n\t\t\t\t\t\t\t\t\t<span class=\"elementor-button-text\">Read Full Insights<\/span>\n\t\t\t\t\t<\/span>\n\t\t\t\t\t<\/a>\n\t\t\t\t<\/div>\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Five Reasons Why You Should Consider Investing in a Global Small Companies Portfolio May 20, 2025 1:16 am Key Insights [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":3574,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_canvas","format":"standard","meta":{"inline_featured_image":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center 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