Global Small- and Midcaps: Searching For Big Opportunities

Where can we find the best opportunities in the Global Small- and Midcaps asset class?

Nick Paul:

There's tremendous opportunity in the asset class today. One of the big reasons for that simply is that there's 8,000 names in the benchmark. Many of these names are very thinly covered by sell-side research. So it tends to be a very inefficient asset class that really lends itself to active management. So, tremendous opportunity. I'll give you a couple of quick examples. The first would be in IT services. We're currently finding opportunities, and actually have been for the last several years, opportunities in IT services, particularly within Japan. So Japan, if you look at Japan relative to other developed markets, are still sort of behind the curve in the digital transformation or the transformation to the cloud. IT services are going to be a big part of the ability for companies to get there, and we're finding tremendous opportunity in that area of the market.

Another quick example would be in infrastructure, both in the US and even in the UK and in Japan as well. A number of very interesting opportunities in the US as the Inflation Reduction Act has increased spending on traditional infrastructure, so think bridges and roadways. We've identified engineering companies that should benefit from that. Concrete and aggregates business that go into constructing these infrastructure projects is another example. In Japan, we actually own an engineering company focused on energy and energy transition, where that is going to take years to play out within Japan and many other markets. And even in the UK, we own an aggregates business that is tied into infrastructure. So infrastructure's another great example.

Onshoring gets a lot of press these days, or nearshoring. We own an industrial real estate investment trust in Mexico. So as companies look to move supply chains and goods and services closer to the US, that's another opportunity that we've found more recently. So this is just a couple of examples, but again, with 8,000 names out there, broadly diversified across regions and sectors and industries, there's ample opportunity to find very, very unique names and opportunities in this asset class.

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