You may have noticed that small-caps are taking a larger slice of Asset Allocator’s coverage recently, thanks to a surge of DFM interest in the space.
Abrdn, Albert E Sharp, and Quilter Cheviot are all among the names to have taken positions in that asset class across 2024, and in fact just last week we reported that Fidelity’s multi-asset head has made a tactical bet on them too.
This week we can confirm another allocator has jumped aboard.
Peter Dalgliesh, chief investment officer at Parmenion, has reinvested his cash position into global small-caps, as he sees their valuations as particularly enticing when compared to both their historical average and the wider market.
In doing so the firm has increased their weighting to Brown Advisory US Smaller Companies and Gresham House UK Smaller Companies.
In their balanced portfolio, this equates to a 5.5 per cent position – significantly higher than our DFMs’ average of a mere 1 per cent.
It’s pretty timely, too – we recently covered the ways in which allocators are casting their net wide in the search for alpha among domestic smaller companies.
Chelverton UK Equity Growth and Tellworth UK Smaller Companies lead the pack as the two most popular offerings in our database, though this opens up the space for allocators to exercise their personal preferences when selecting from an array of funds lower down the market-cap scale.
Indeed with this rebalance Parmenion becomes the third DFM in our database to own the Gresham House mandate, which will celebrate its three-year anniversary in February.
On the sale rail
Alongside this move, both their uncorrelated strategies and their Japanese exposure were pared down and reinvested into UK and European stocks, once again justified by the attractive valuations on offer there.
“When you're looking at an asset class that is under-owned, unloved, and undervalued, those are pretty reasonable checkpoints for you to start to build some conviction in,” he said.
Dalgliesh puts his tinkering down to the team moving out of their previously-underweight risk attitude, as he thinks the ‘jury is still out’ as to whether the consequences of rapid interest rate rises have actually arrived yet.
And one other region he’s particularly keen on at the moment is China.
“The phrase uninvestable was used a great deal at the beginning of the year,” he said.
“It seems to have eased off a little – and yes, it has its challenges – but in terms of its contribution to global growth, it's definitely in the top four.
“Do you just write it off? Well, no, we don't. Care and discipline is absolutely required, but it's that trade off – we think that the care that you need to exercise in China is equally valid in India.”
