Australian Small Companies

We believe that the dispersion of returns in the small cap sector presents opportunities for skilled investors to outperform.

By favouring companies with sustainable competitive advantages, strong financials, quality management and predictable earnings we can deliver superior returns and protect from downside risks. Sustainability is one of the six factors that the team assesses when evaluating a company’s investment credentials.

Investment Philosophy and Approach

The team feels that value is discovered through a bottom-up investment approach with an emphasis on Industry, Financials and Management.

The outcome of our disciplined investment process is the delivery of consistent absolute returns across all investment cycles.

Team Profile

The leader of the team is Dawn Kanelleas, who has been in this role since 2008. She has over 20 years' experience in investment markets, both on the sell side and buy side. She is supported by portfolio managers Michael Joukhador and Pavlos Totsis, who each have 10 years of experience at the firm, including nine years in the Australian Small Companies team.

The team's RI lead is Michael Joukhador. 


Stewardship and ESG Integration

Sustainability is one of the six key criteria used by the Small Companies team in the evaluation of securities. Analyst assessment of a company includes criteria related to practice, commitment and disclosure of social and environmental issues by management and performance relative to peers. For example, social assessment incorporates measures of employee and stakeholder policies and human rights; environment considers issues of climate change, company efficiency and practices relative to industry and acceptable standards; and management commitment is measured in terms of disclosure policies and practices and the integration of sustainability into employees' key performance indicators. The team’s proprietary analysis is supplemented by company disclosures, media and external research.

Assessment and monitoring

Team members revisit each company’s progress on managing ESG issues as part of the ongoing company research program.


Where ESG and sustainability factors are determined to have a material impact on profitability, they are quantified and can influence other factors, most directly in the valuation and financials of the stock.


The Small Companies team has active direct dialogue with many Chairs and/or company management on material ESG issues, which we identify through our consideration of ESG risks. We try to gain comfort that the company’s senior management and board are aware of, and accountable for, the management of material issues. In addition to assessing how companies are managing ESG issues, we encourage the entities in which we invest to improve their ESG disclosure.

Proxy Voting

The team's full proxy voting record and statistics are available here. 


"By favouring companies with sustainable competitive advantages, strong financials, quality management and predictable earnings we can deliver superior returns and protect from downside risks."

 "Sustainability is one of the six
factors that we assess when evaluating a company’s investment credentials."

Investment Information and Performance

Investment characteristics

Average turnover across all funds*
(Five years annualised)
Stock name retention over five year period*  24%
Number of holdings
Colonial First State Wholesale Small Companies Fund**
% of portfolio companies met with
Across all funds, during life of investment.


Top five holdings
(as at 31/12/2016)
All funds combined*

Iress Market Technology Ltd
NIB Holdings Ltd/Australia
Independence Group NL
Trade Me Group Ltd
Aventus Retail Pro Units
Top five active holdings
(as at 31/12/2016)

Colonial First State Wholesale Small Companies Fund**
Iress Market Technology Ltd
Trade Me Group Ltd
Aventus Retail Pro Units


Performance and investment characteristics are as at 31/12/2016
Performance is quoted pre-fees and in $A terms.  Investors in other currencies will be subject to exchange rate fluctuations which will affect investment returns.
Past Performance is not indicative of future performance,
Source: First State Investments
*Includes all funds and segregated accounts managed by any entity within Colonial First State Global Asset Management. Not all funds and accounts are registered or available in all jurisdictions. This may not be representative of your jurisdiction.
**This Fund has been selected as representative of the strategy but this may differ across the other funds and accounts within the same strategy.

Please follow this link for information on how our RI and Stewardship Measures are calculated. 


% of the team’s portfolios outperforming their relevant benchmark over five years * 100%
Weighted average of outperformance*
(Five years annualised. Weighted by size of fund)
Absolute return (per annum) over five years **
Colonial First State Wholesale Small Companies Fund


ESG Profile

The following tables incorporate third party information to provide additional context. We believe that providing an independent view of some typical ESG issues facing the industries and countries where we invest helps to emphasize the importance of considering ESG factors, as well as the value that this approach can add to investment outcomes. These risks are not company specific, but are relevant to the team's larger industry and country exposures.

This contextual information should be considered alongside the description of the team's approach to integrating and engaging on ESG issues, and the company-specific case studies provided. Taken together a more complete view can be formed on how the team is able to generate value through responsible investment and stewardship.

Typical ESG Risks by Sector

The bar chart below counts the number of times different risks have been flagged by Sustainalytics as being material for the different sectors the team invests in. The line graph does the same, only as a weighted average based on the value of the team's holdings in each sector across all portfolios. These risks are generic for the industry and may be different for individual companies. They also don't reflect how individual companies are managing the risks. 

Sector Split

ESG Sector Split

Climate Change

The section below provides addition, team specific, information on climate change. Further information on our approach to climate change can be found in our climate change statement. 

Team Climate Change Statement

Climate change is an issue that the team evaluates when considering the Sustainability of a company’s activities. Although climate change may not be an important short-term issue for some stocks, it may be an important long-term issue for stocks with sensitive exposure to trends in climate change.

The Australian Small Companies team’s research process assesses every potential investment on a range of factors, including sustainability. Carbon risk is considered as part of the sustainability rating.

Holdings in companies with material fossil fuel revenues 

The table opposite outlines the companies which the team invests in that have exposure to fossil fuels. There is no revenue, cost curve or other threshold applied and so the fossil fuel exposure should not be seen as a guide to the risk of stranded assets, however it is reasonable to expect that the attention paid to the risk of stranded assets by teams will correspond to their fossil fuel exposure.

Number of Companies % of Funds
Number of companies 80 100%
Fossil Fuel Companies inc gas 3 2%
Total 3 2%
Companies with Gas Reserves 2 2%

Carbon exposure

The table opposite provides an overview of the team's carbon exposure. The first measure provides an equity ownership approach to accounting for the emissions, while the second set of numbers provides a guide of how efficient the average company held is versus other companies in that industry group. The chart below shows the difference between the two. 

The carbon emissions, fossil fuel and revenue data have been provided by MSCI. 62% of the carbon emissions data has been estimated due to gaps in company disclosure and 8% were not covered. Companies without carbon or revenue data have been excluded, hence the difference between these and the fossil fuel numbers. Please see the RI and Stewardship Measures page for more information on how these and other metrics have been calculated.

Equity Share Carbon Emissions Number of Companies Team Average Team Company Intensity Number of Companies (GICS) Industry Group (Australia) Average Industry Group Intensity (Australia)
Materials 13304.68 9 170.22 73 791.56
Transportation 11166.6 2 887.4 11 763.77
Commercial & Professional Services 8904.39 4 202.35 21 79.26
Energy 5501.73 3 35.32 22 875.98
Household & Personal Products 5048.3 2 478.94 3 288.48
Health Care Equipment & Services 2462.94 3 34.91 20 33.13
Software & Services 2395.15 9 177.51 27 38.55
Media 1834.49 5 28.08 16 24.38
Retailing 1285.79 8 27.71 28 33.12
Consumer Services 814.72 4 113.12 26 56.54
Other 1587.43 27 113.33 171 300.47
Grand Total 54306.23 76 162.01 418 299.6

Difference Team Average Intensity vs Industry Average Intensity

Fossil Fuel and carbon information are as at 31/12/2015 (most recently available), holdings information is as at 31/12/2016
Source: MSCI

Proxy Voting

Proxy voting history by type of resolution

The table below contains the proxy voting history for the team by issue type. The chart provides the same information for 2016.

Abstain Against For 2016 Total
Audit/Financials 1 1
Capital Management 1 20 21
Director election 10 108 118
Director Remuneration 7 7
Executive Remuneration 1 7 53 61
General business
Governance related 4 28 32
M&A 1 1
Remuneration Related 5 38 43
Shareholder proposal 1 1
Shareholder rights
Grand Total 1 27 257 285


Proxy voting information is as at 31/12/2016
Source: First State Investments / CGI Glass Lewis


Please follow this link for information on how our RI and Stewardship Measures are calculated.

Voting independence 

The chart below shows the number of times the team have voted against management recommendations, our proxy advisors recommendation or against both. The purpose of this table is to show the independent judgement which is applied by the team when making voting decisions.