On May 30, 2018, AMG launched AMG TimesSquare Global Small Cap (TSYNX / TSYIX), the fifth AMG fund sub-advised by TimesSquare Capital Management. TimesSquare is a growth-equity firm that works primarily with institutional clients. They manage about $18 billion in assets.
The fund is managed by a team of three, Magnus Larsson, Grant Babyak and Ian Rosenthal. Mr. Larsson also co-manages AMG TimesSquare International Small Cap (TCMPX) with Robert Madsen while Grant Babyak co-manages AMG TimesSquare Small Cap Growth (TSCPX, closed to new investors) with Kenneth Duca. Together Messrs. Babyak and Rosenthal manage AMG TimesSquare Mid Cap Growth (TMDPX).
Global Small Cap will use the same investing discipline as the other TimesSquare funds. They are, in general, research-intensive, bottom-up fundamental investors. They describe it this way:
TimesSquare uses a bottom-up investment process driven by fundamental research conducted by its investment analysts. TimesSquare also applies a macro overlay to monitor and mitigate country risks through active management. Under normal circumstances, the Subadviser seeks to maintain a growth oriented focus …
In broader terms, it anticipates investing in stocks with market caps comparable to those of the MSCI World Small Cap Index (currently, $1.4 million – yikes! – to $13 billion) and keeping at least 35% outside of the US. The portfolio currently contains about 100 names, which is consistent with the 80-100 stock portfolios maintained by its siblings.
Two reasons to begin tracking the fund:
TimesSquare does good work. The record of all three of its older siblings is solid and consistent. All three are rated as four star funds by Morningstar (as of 7/27/2018), their “machine learning” algorithms designate both Small Cap and Mid Cap as Silver medalists, and International Small Cap is rated as a Great Owl by MFO for its top tier risk-adjusted performance. All three funds have offered exceptional downside protection, with downside capture ratios in the 80s and betas between 80-90.
Using standard measures, here’s a snapshot of the funds’ five-year performance records against their respective Lipper peer groups. Green cells represent places where TimesSquare substantially outperformed their peers, yellow cells are valued comparable to their peers which generally means “within 100 bps, either way.”
Annualized Return Max Drawdown Standard Deviation Downside Deviation Bear Month Deviation Ulcer Index Sharpe Ratio Small Cap Growth 12.1% 16.6 12.7 7.8 5.7 5.5 0.93 International Small Cap 13.3% 7.6% 11.5 6.0 3.9 3.0 1.12 Mid Cap Growth 11.7 12.9 10.6 5.8 4.5 3.4 1.06
In summary: perfectly respectable returns for consistently below-average volatility in both “normal” markets and choppy ones.
There aren’t a lot of good global small cap options. At least for folks looking for no-load, retail options. Grandeur Peak has an outstanding collection, but they’re all closed except for Global Stalwarts (GGSYX) which has only 20% of its portfolio in small caps. Similarly, Vanguard Global Minimum Volatility (VMVFX) is categorized as “global small/mid” but has only 7% in small caps. Wasatch Global (WAGOX), once run by the folks now at Grandeur Peak, has been only “okay” over the past five years.
On whole, this will be one worth watching for folks looking to find global growth stocks in a tested, risk-sensitive strategy.
$2,000 minimum for “N” shares, reduced to $1,000 for tax-advantaged accounts. “N” shares have a 1.40% e.r. after waivers. There are also two institutional share classes.
The fund’s homepage contains the curious announcement that the fund’s for sale in only nine states (New York, New Jersey, Connecticut, California, Pennsylvania, Colorado, Indiana, Georgia, Wyoming) … and Guam. A representative explains, “Since the Fund was recently launched, AMG Funds limited the Fund’s availability as the Fund gains a track record. The limited availability is intended to reduce the Fund’s operational expenses in its early life. Some states, including Guam, have low/no operational costs, so they are already available for investment. The availability will be expanded as more shareholders enter the Fund.” The TimesSquare global small cap strategy has about $216 million in assets, including $2 million in the AMG fund.