The eighth wonder of the world and the Montgomery Small Companies Fund

While small capitalisation companies generally involve more risk because of their lower liquidity, their greater sensitivity to managements’ influence, and their greater sensitivity to economic conditions, they have proven over a long time horizon to be a rewarding asset class to allocate capital – preferably for patient investors who grasp the power of compounding.

Since inception in September 2019, the Montgomery Small Companies Fund has made an admirable start out-performing its benchmark the S&P/ASX Small Ordinaries Accumulation Index by over 17 per cent.

Investing in low-returning asset classes, such as bank term deposits, can reduce anxiety, it can also have higher long-term opportunity cost in terms of lower capital accumulation.

In this whitepaper, we look at the Montgomery Small Companies investment methodology which categorises the companies within their investment universe into four areas, and the differences in annual rates of return having a large impact on long-term results.


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