Abrdn Small Cap Funds Show Divergent Performance in Q2 2024

International Small Cap Fund Outperforms

The Abrdn International Small Cap Fund demonstrated strong performance in the second quarter of 2024, outpacing its benchmark. The fund returned 3.77% (net), surpassing the MSCI ACWI ex USA Small Cap Index's 2.87% return 1

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. This positive outcome was attributed to successful stock selection across various sectors and regions.

Key Drivers of International Fund Success

Several factors contributed to the fund's outperformance:

1. Strong performance in the industrials sector, particularly in Japan and the United Kingdom.
2. Positive contributions from the information technology sector, especially in Taiwan.
3. Effective stock selection in the health care sector across multiple countries 1

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US Small Cap Equity Fund Faces Headwinds

In contrast, the Abrdn US Small Cap Equity Fund encountered challenges during the same period. The fund underperformed its benchmark, returning 4.91% (net) compared to the Russell 2000 Index's 8.13% return 2

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. This underperformance was largely due to stock selection issues and sector allocation decisions.

Factors Impacting US Fund Performance

The US fund's performance was affected by:

1. Weak stock selection in the health care and consumer discretionary sectors.
2. An underweight position in the energy sector, which performed well during the quarter.
3. Challenges in the information technology sector, particularly in semiconductor-related stocks 2

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Market Context and Outlook

Both funds operated in a complex market environment characterized by:

1. Ongoing concerns about inflation and interest rates.
2. Geopolitical tensions and their impact on global trade.
3. Sector-specific challenges, particularly in technology and health care.

Looking ahead, fund managers for both portfolios remain cautiously optimistic. The International Small Cap Fund team sees potential in companies with strong balance sheets and sustainable business models 1

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. Meanwhile, the US Small Cap Equity Fund managers are focusing on identifying undervalued companies with potential for long-term growth 2

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Investment Strategies and Positioning

Both funds maintain a focus on quality companies with strong fundamentals:

1. The International fund continues to seek opportunities in industrials, consumer discretionary, and information technology sectors 1

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2. The US fund is repositioning to capitalize on potential opportunities in health care and technology, while maintaining a balanced approach to risk management 2

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As global economic conditions evolve, both funds are adapting their strategies to navigate market volatility and seek long-term value for investors.