Fiera Capital has launched its 'all-seasons' Small-to-Mid (SMID) Cap growth strategy to European investors, reflecting the increased demand for high-growth US equities in European markets.
As of March 31, 2024, the strategy had outperformed the Russell 2500 growth index for 23 years, returning 24.6% over 12 months, and 15.3% over three years.
Run by Sunil Reddy, the $6.1bn fund holds 60-90 companies with revenues between $150m and $10bn at the time of purchase. The portfolio identifies stocks positioned for further growth based on their innovative solutions to current market challenges, such as their use of cloud computing, e-commerce and AI.
Reddy said: “The market tends to underestimate the longer-term opportunity posed by small to mid-size companies”, noting they “represent an excellent opportunity for investors seeking exposure to dynamic US companies beyond the highly subscribed and analysed large-cap market”.
Klaus Schuster, EMEA CEO, added that US equities have recently become a “growth powerhouse” but the small to mid-cap segment remained “under-owned and under-researched”.
More than a third of companies on the Russel 2500 Growth index do not have earnings, Fiera claimed, making an active approach a useful one in the asset class.
“A passive approach just doesn’t work when it comes to the small and mid-cap market,” Reddy said, noting that investors need to “identify and avoid these zombie companies”.