Finding the jewels of inefficient markets

Allianz Global Small Cap Equity Strategy

The Allianz Global Small Cap strategy invests in smaller companies across global equity markets with the aim to outperform the MSCI World Small Cap Index. We believe that substantial inefficiencies exist in small cap markets around the world allowing active managers to generate superior risk adjusted returns.

Philosophy

We believe substantial inefficiencies exist in small cap markets around the world¹ allowing managers to generate superior risk adjusted returns. With a large universe of stocks, under-covered relative to larger companies by sell-side analysts², we believe smaller companies are best researched, invested in and monitored by local, native portfolio managers drawing on our locally based resources including local AllianzGI analysis and Grassroots^SM Research. We also believe that to best gather this alpha we must make the regional portfolio managers fully accountable and responsible for their investment decisions.

• Small caps tend to outperform large caps, especially during periods of economic recovery.
• Small caps are dependent on local market conditions. A global small cap portfolio is less affected by local shocks.
• Replacing a portion of the large cap allocation in a portfolio improves risk-return characteristics.

Process

The Global Small Cap portfolio is an aggregation of four dedicated regional sub-portfolios – US, Europe, Japan and Asia. Our investment approach recognises that to generate superior returns in global smaller companies, the research, investment and monitoring process should be the responsibility of local portfolio managers and analysts living and working in each region around the world. Stock analysis and selection are based on extensive contact with companies through one-on-one meetings and site visits. Our investment approach delegates four regional sub portfolios to the AllianzGI small cap teams in North America, Europe, Japan and Asia. These teams are responsible and accountable for the geographical, sectorial and stock selection, which come together to form the Allianz Global Small Cap strategy.

For us at Allianz Global Investors, measuring risk is an important part of managing client portfolios. Risk control features are built into our portfolio management process, including: Quantitative Monitoring Screens, Team Collaboration & Monitoring (through team dialogue and systems designed for efficient information flow) and Systematic Management Oversight via monthly CIO review, and quarterly Global CIO review.

1 Fama and French (1992).   2 Arbel and Strebel (1983).

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested.  

Past performance is not a reliable indicator of future results. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable, but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or wilful misconduct. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. 

This is a marketing communication issued by Allianz Global Investors UK Limited, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk.  Allianz Global Investors UK Limited, company number 11516839, is authorised and regulated by the Financial Conduct Authority.  Details about the extent of our regulation are available from us on request and on the Financial Conduct Authority's website (www.fca.org.uk). The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors UK Limited.