IMC Global Small Companies Fund update – Q2 2025

In this IMC fund update for Q2 2025, global small caps outperformed amid rebounding markets, easing inflation, and early signs of a cyclical recovery.
Watch the latest update from Travis Prentice, Chief Investment Officer of the Informed Momentum Company and Portfolio Manager of the IMC Global Small Companies Fund, as he shares how the fund navigated the volatility, where performance was strongest, and why adaptability continues to drive the strategy.

Watch/Listen to the Q2 2025 IMC fund update ⏬:

 

 

Transcript:

Market backdrop and tariff volatility

The start of the June quarter was dominated by tariff uncertainty as President Trump unveiled his “Liberation Day” trade tariffs, followed by a 90-day pause a few days later, which helped deescalate trade tensions and stabilise markets. This, alongside moderating inflation in the US and Europe, and clearer signs of monetary policy easing, catalysed a broad-based rebounding global equities in the June quarter.

Small-cap stocks benefited against this backdrop, as they’re typically more cyclical and rate-sensitive. So, global small caps finished the quarter, as measured by the ACWI small cap index, up about 6.85%. Just ahead of large and mid-cap, that was up just a little over 6%. Emerging markets were a source of strength, up 11.3% in the benchmark, versus developed markets, which rose only 6%.

Korea was the best-performing country in the index for the quarter, with a gain of 36%. Also up year-to-date, 39%. On the other hand, the US was a laggard this quarter, up just 2.9%.

A pivot back into high-growth and AI-related industrial stocks helped propel growth over value during the June quarter, as the ACWI small cap growth was up 9.68%, compared to value, up only 4.12%. Within the market, from a factor perspective as well, beta and volatility were standout performers in the big rally in the June quarter, and momentum was positive, but it definitely trailed volatility in beta.

Fund performance

So, that was the summary of the market environment in the June quarter. From a fund performance perspective, in the June quarter, the fund gained 9.47% outperforming its benchmark by about 270 basis points. Within the strategy, Korea was a source of strength as we benefited from both positive stock selection and being overweight. Most of the strength came from within our portfolio and industrial sectors. Therefore, stocks like Hyundai Rotem and Doosan performed very strongly. Additionally, stock selection in Taiwan was a source of strength, primarily driven by technology companies such as Elite Material.

Country and sector standouts in the IMC fund update

Germany was also strong for us, mostly in industrials, aerospace, and defence, such as Hensoldt. And Greece was a source of strength, especially from a stock selection perspective in the strategy, with most of that strength coming from Greek banks, such as Alpha Bank, Piraeus, and the National Bank of Greece. Those were some of the best performers within the country.

And from a stock perspective, one of the big winners we’ve seen over the last year, and particularly in the June quarter, with the stock up 61% in the quarter alone, has been Pop Mart. The Hong Kong-traded company is benefiting from a massive surge in Labubu, both globally and as they expand outside of China, including in the US.
So, very strong growth from Pop Mart, and really, what has been a bigger theme in terms of “kidults” – adults being the incremental buyers of toys. So, that’s been a very strong stock for us over the last year or so, and particularly in the June quarter.

Portfolio positioning

As for the portfolio, how it’s positioned and what changes have occurred quarter over quarter. The weights within Korea and Taiwan have increased. Those have been the biggest changes in the portfolio, and we also found a couple of additional ideas in Spain that we usually don’t see. On the other side, we’re seeing a reduced exposure to China. We’re still overweight, but we have reduced exposure in China. Again, we’re coming to everything stock by stock.

That’s what we see from quarter to quarter. Another thing to note from a positioning perspective is that the portfolio remains underweight in the US, a trend that has been consistent throughout the year. It’s gone down a little bit more, but the shift away from the US has been a recurring theme for this year to date.
We still find ideas, but it’s probably our lowest weight in our strategy since its inception. We’re currently exploring better ideas outside of the US.

Sector allocation

Then, at the sector level, we’ve added weight in industrials, making it our largest overweight position in the portfolio. That reflects many different things, including aerospace and defence in Europe, but also the emergence of the industrial complex, as it relates to AI, which has taken on new leadership after a stumble earlier in the year.
We’re seeing a greater proportion of overweight positions in industrials within the portfolio, while also moving away from financials and healthcare at the margin. The biggest underweight in the portfolio is real estate, materials, and energy. But again, we come to these weights all from the bottom up based upon where we’re finding the strongest trend.

Outlook

And that brings me to, from an Outlook perspective, what do we expect? What do we see going forward? I think for global small caps as an asset class, a more favourable interest rate environment. We definitely have attractive relative valuations, and perhaps some early signs of a cyclical rebound are emerging.
And so those are reasons to be optimistic about global small as an asset class. For our fund in particular, we have the advantage of being adaptable and able to pivot to what works. As these periods of heightened volatility subside, it is clear that we’ve had them this year. So far in 2025, it has been very volatile and violent.
But as this volatility subsides, new trends tend to emerge, and momentum will adapt to reflect that fresh leadership. So, what that leadership will look like as we go forward is anyone’s guess.

For us, it’s not about prediction, it’s about adaptability. Momentum doesn’t resist the market, it flows with it.
So we don’t try to time exposures or anything else, really. We simply look and identify trends wherever they may emerge. So, adaptability is the key to our long-term outperformance. And I would just say, from an investment standpoint, with these crazy markets. Don’t try to time exposures, stay diversified, adaptable, and continue to invest in what works. And I think our fund is a good reflection of always being in the things that are working now.

To find out more about the IMS Global Small Companies Fund, click HERE. Follow us on LinkedIn.

*The text has been edited for clarity.

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Disclaimer:

This fund update has been prepared by SG Hiscock & Company (SGH) to provide general information only and is not intended to take the place of professional advice. It does not take into account the investment objectives, financial situation or particular needs of any particular person.

Equity Trustees is the responsible entity for the IMC Global Small Companies Fund, Neither SGH, Equity Trustees nor any of its related parties provide any warranty of accuracy. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product. Follow the link the in the description for the full disclaimer. https://sghiscock.com.au/podcast-disclosures-and-disclaimers/.