BlackRock today announced the launch of a new fund that will invest in small-cap companies across the globe.
The BlackRock Global Smaller Companies fund aims to capitalise on the high-alpha opportunities lurking in this under-researched end of the market.
It will be managed by Dan Whitestone and Matthew Betts, who have both run funds at the firm since 2013.
Whitestone said: “We believe small-cap stocks can present us with the most attractive hunting ground as these companies tend to operate in an inefficient, under-researched area of the market and can offer the potential to generate returns for our clients over the long term.”
He noted that now is the most advantageous time to launch the fund seeing as small-cap companies are trading at a 26% discount relative to their large-cap peers. This valuation dispersion is even wider in markets such as the UK, where both managers have experience investing.
Whitestone has specialised in UK smaller companies via the BlackRock Throgmorton trust since 2015. Under his management, the £584m investment company has climbed 159.7%, flying 45.5 percentage points against the average IT UK Smaller Companies trust.
Performance has slipped in more recent years, however, with the trust making a 24% loss over the past three years. Its peers group fell by a shallower 1.9% over the period.
Similarly, Betts has experience investing in UK small caps having run the BlackRock Growth and Recovery fund since 2020. Despite challenging market conditions for the asset class, the fund is up 19.8% over the period – more than doubling the IA UK Smaller Companies sector average of 8.7%.
Now that he and Whitestone are expanding their investment pool to global small caps, Betts said: “Alongside the attractive valuation opportunity right now, we believe that small-cap funds can provide excellent long-term investment due to their historic outperformance compared to large caps.
“Within this large universe, the companies we seek to invest in are characterized by having strong management teams, defensible market positions, differentiated or competitive product offerings, and are underpinned by structural growth drivers.”
