Don’t forget mid-caps
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    Don’t forget mid-caps

    Brett Liddell, CFA
    20 June 2017

    It’s no secret that most Australian investors are concentrated in blue-chip shares. By holding too many large eggs in too few baskets investors maybe missing out on the growth opportunities offered by Australian mid-caps. 

    • Historically, mid-caps have produced stronger returns than large-caps, with only slightly more volatility; and
    • Mid-caps have also produced risk-adjusted outperformance relative to small-caps 

    Mid-caps are simply, the sweet spot of the Australian stock market. There are several reasons for this:

    • Mid-caps are where M&A happens. Vocus Communications is the latest takeover target but there have been several over recent years, including Toll Holdings, Dexus, Asciano and iiNet;
    • Mid-caps tend to reinvest more in their business than large-caps;
    • Mid-cap companies are often more agile then large-caps, able to take advantage of opportunities more quickly by virtue of their smaller size; and
    • According to S&P, constituents of the S&P/ASX MidCap 50 have experienced meaningfully higher revenue growth and higher net income growth, as the graphs below indicate (source Mid-Cap Indexing in Australia, S&P Dow Jones Indices, 2016)

    Mid-Cap S&PASX MidCap 50


    Reflecting these advantages, the graph below illustrates that over the long term, as well as in recent times, the S&P/ASX Midcap 50 Index has easily outperformed the benchmark large-cap and small-cap indices. Indeed, in recent times, mid-caps have sprinted ahead of large-cap shares.

    Mid Cap performance to 31 May 2017

    The VanEck Vectors S&P/ASX MidCap ETF (ASX: MVE) is the only ASX ETF which tracks the S&P/ASX MidCap 50 Index.


    IMPORTANT NOTICE - FOR USE BY FINANCIAL SERVICES PROFESSIONALS ONLY

    This information is issued by VanEck Investments Limited ABN 22 146 596 116 AFSL 416755 (‘VanEck’) as responsible entity and issuer of the VanEck Vectors S&P/ASX MidCap ETF (‘Fund’). This is general information only and not financial advice. It is intended for use by financial services professionals only. It does not take into account any person’s individual objectives, financial situation or needs. Before making an investment decision in relation to the Fund, you should read the PDS and with the assistance of a financial adviser consider if it is appropriate for your circumstances. The PDS is available at www.vaneck.com.au or by calling 1300 68 38 37. The Fund is subject to investment risk, including possible loss of capital invested. Past performance is not a reliable indicator of future performance. No member of the VanEck group of companies gives any guarantee or assurance as to the repayment of capital, the payment of income, the performance or any particular rate of return from the Fund.

    The "S&P/ASX MidCap 50 Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and ASX Limited (“ASX”) and licensed for use by VanEck.  S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed by VanEck.  The Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, or ASX and none of them makes any representation regarding the advisability of investing in the Fund. Such parties do not accept liability for any errors, omissions or interruptions of the S&P/ASX MidCap 50 Index and do not give any assurance that the Fund will accurately track the performance of the index or provide positive investment returns. Inclusion of a security within the index or Fund is not a recommendation by any party to buy, sell or hold such security.