Fiera Capital, an independent asset manager headquartered in Montreal, Canada, has introduced its Small-to-Mid (SMID) Cap Growth strategy to Asian institutional and wholesale investors amid the strong demand for US equities in the region.

The strategy seeks to deliver significant capital appreciation across multiple market cycles, providing clients with stability during market downturns, the firm says.

The portfolio typically holds 60 to 90 positions and consists of companies in the fertile US small and mid-cap equity universe, which includes a wide variety of developing and mature businesses.

With a track record of over 23 years, the US$6.1 billion fund has returned 24.61% over 12 months and 15.25% over three years (as of March 31 2024), delivering significant outperformance versus its Russell 2500 Growth Index benchmark, providing some downside protection and reduced volatility.

“The market tends to underestimate the longer-term opportunity posed by small to mid-size companies,” says lead portfolio manager Sunil Reddy. “US small and mid-caps represent an excellent opportunity for investors seeking exposure to dynamic US companies beyond the highly subscribed and analysed large cap market.

At the same time, almost a third of the companies in Russell 2500 Growth Index don’t have any earnings. “A passive approach just doesn’t work when it comes to the small and mid-cap market,” Reddy explains. “Our highly active approach is what allows us to identify and avoid these zombie companies and a lot of idiosyncratic risk unique to the smaller end of the market. More than 85% of our alpha comes from the team’s stock picking.”

The seven-member portfolio management team combines bottom-up fundamental stock selection with top-down global secular trend tracing. Prospective companies are those that provide innovative solutions to major technological, economic, demographic, regulatory, or societal change. Secular themes such as cloud computing, e-commerce, artificial intelligence, and advances in therapeutics form a tailwind for these companies, the firm says.

Rob Petty, Asia chief executive officer, adds: “The US SMID Cap strategy can complement pre-existing exposure to large-cap equities and offers diversification without necessarily attracting additional risk.”