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American Century launches Global Small Cap Fund

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MEDIA RELEASE: American Century Investments has reinforced its commitment to the Australian market with the launch of its American Century Global Small Cap Fund via a unit trust structure, making it available to local wholesale investors.

The Fund is an actively managed portfolio predominantly comprised of listed global small cap equities. The strategy uses a fundamental, bottom-up investment process aimed at providing superior risk-adjusted returns over the long-term.

American Century’s investment philosophy of growth investing is centred on the belief that accelerating, sustainable growth in revenues and earnings, driven by an inflection in business fundamentals, results in stock price outperformance. It also believes the direction of earnings growth is a more powerful predictor of stock price performance than the absolute level of growth. Its process is designed to uncover stocks with potential to outperform as earnings growth accelerates, market expectations rise, and multiples expand.

Senior portfolio manager of the small cap strategy, Trevor Gurwich, said the Fund provides Australian investors with additional investment opportunities that they may not be able to access on their own.

“We believe our differentiated growth approach is well suited to global small cap investing. We also benefit from a well-resourced, experienced team.

“We utilize a distinct approach to growth investing which we believe takes advantage of persistent market inefficiencies and opens up a broader set of opportunities than a traditional growth approach.

“It is an opportune time to be launching the Fund in the Australian market, particularly given the positive outlook for small cap earnings growth and attractive small cap valuations relative to large caps,” he said.

The investment objective of the Fund is to achieve long-term capital growth through investment in an actively managed portfolio of equity securities issued by small capitalisation companies in both developed and emerging countries. Its benchmark is the MSCI ACWI Small Cap Net ($AUD) Index, and the minimum suggested time frame for investment is at least five years.

The Fund takes into account material ESG issues and corporate governance practices and seeks to avoid companies that do not meet fundamental responsibilities, including in areas such as human rights, labour, environment, and anti-corruption as well as avoiding companies with exposure to controversial weapons, cluster munitions, and tobacco.

Mr Gurwich said that as the global economy continues to recover from the impacts of COVID, there are some thematics which play into the hands of global small caps and investment portfolios are shifting accordingly.

“The stay-at-home thematic within small cap stocks is becoming less prevalent as people seek a return to normality and in-person experiences.

“Global small caps poised to benefit from the return to normality include travel and leisure companies, albeit the emergence of the Omicron variant has created hesitancy. We also see continued demand for robust IT spending, with companies realizing that IT investment is critical to their success in a hybrid world.  Our bottom-up process is identifying well-run, small cap technology companies that are direct beneficiaries of that increased spending.

“The small cap sector continues to provide many attractive stock selection opportunities. There will certainly be obstacles on the way to economic recovery, but they will more likely be speed bumps, not roadblocks,” he said.

American Century Investments introduced its first strategies for Australian investors in 2009 and opened an Australian office in 2018.

According to interim head of Asia Pacific, Elizabeth Trinh, the firm is committed to an investor-type diversification strategy and currently manages almost A$3 billion on behalf of Australian institutional and intermediary investors.

“Since 2009, we have offered Global Growth and Healthcare Impact funds to intermediary investors through a distribution relationship with Zurich Investments,” she said.

Founded in 1958, American Century is a privately-held global asset management firm, which is majority owned by the Stowers Institute for Medical Research. Through the unique ownership structure, dividend payments totalling US$1.8 billion have been redirected into the Institute to assist with medical research into cancer and other diseases.

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