Insight

Smaller Companies. Bigger Opportunities.

7 February 2024
Scott Bennett
Scott Bennett
Director, Factor Investing & Multi-Asset Strategies
Smaller Companies. Bigger Opportunities.
Key takeaways
Concentration is a key differentiator
1

The lower stock and industry concentration of the S&P/ASX Small Ordinaries Index compared to the S&P/ASX 100 offers investors diversification benefits and greater secular growth opportunities.

Opportunity for active investors
2

Over time, active managers have displayed considerable and persistent skill in outperforming the S&P/ASX Small Ordinaries index. We also see a high amount of efficacy from traditional fundamental drivers of company performance.

Economic stability provides strong tailwinds for 2024
3

A stable and decreasing interest rate environment is likely to support the performance of smaller companies, who often have greater debt exposure than their larger counterparts.

Smaller Australian companies, in the form of the S&P/ASX Small Ordinaries Index, have always offered a more diverse range of investment options and better active management opportunities than their larger counter parts (the S&P/ASX 100 Index). Despite this, their recent performance has been directly challenged by monetary headwinds, including aggressive monetary tightening by the Reserve Bank of Australia.

Our latest paper explores the intrinsic differences between smaller and larger companies in Australia, the impacts of the recent economic environment and, more importantly, why 2024 looks like the year smaller companies get back on top.

Download the paper

Important Information

  • This document has been prepared only for those persons to whom Invesco has provided it. It should not be relied upon by anyone else. Information contained in this document may not have been prepared or tailored for an Australian audience and does not constitute an offer of a financial product in Australia. You may only reproduce, circulate and use this document (or any part of it) with the consent of Invesco.

    The information in this document has been prepared without taking into account any investor’s investment objectives, financial situation or particular needs.  Before acting on the information the investor should consider its appropriateness having regard to their investment objectives, financial situation and needs.

    You should note that this information:

    • may contain references to dollar amounts which are not Australian dollars;
    • may contain financial information which is not prepared in accordance with Australian law or practices;
    • may not address risks associated with investment in foreign currency denominated investments; and
    • does not address Australian tax issues.

    Issued in Australia by Invesco Australia Limited (ABN 48 001 693 232), Level 26, 333 Collins Street, Melbourne, Victoria, 3000, Australia which holds an Australian Financial Services Licence number 239916.