Just over a year ago, we set out to give South African investors a simple way to access overlooked small- and mid-size companies in global developed markets via an actively managed certificate (AMC). Reflecting on the year, the Denker Global Opportunities Portfolio has navigated a turbulent market, delivered strong results, and reinforced why we believe global smaller companies remain one of the best long-term opportunities.
If you’re unfamiliar with AMCs, jump to the end of this article for an overview of what they are and how they work.
August marked the first anniversary of the Denker Global Opportunities Portfolio.
When we launched the portfolio in 2024, our vision was to give South African investors access to high-conviction opportunities in smaller global companies – an area where we have built deep expertise over more than two decades.
Now, with a year worth of performance history, it feels like the right time to reflect: what has worked, what hasn’t, and why our conviction in this part of the market has only grown stronger.
We launched this product because global small- and mid-caps provide attractive opportunities for long-term returns.
Our investment philosophy has always been rooted in fundamental, research-driven stock picking. Smaller companies, in particular, are fertile ground for this approach. We continue to believe this part of the market is primed for attractive long-term returns, for three clear reasons:
1. Smaller companies tend to offer better growth and return potential over the long run, and valuations are currently very attractive relative to their larger counterparts.
Smaller companies typically grow faster and generate higher returns than their larger peers – and today, they look even more compelling. The MSCI World Mid Cap Index currently trades at a 17% discount to the broader MSCI World Index, despite historically trading at a ~7% premium. This valuation gap, reflected in lower price-to-earnings (PE) ratios, makes smaller companies an attractive entry point for long-term investors.
A PE ratio measures how much investors are willing to pay for a company’s earnings – with lower ratios generally suggesting better value.
Figure 1: PE ratio comparison
Source: FactSet, Denker Capital, 2 October 2025
2. Despite their growth potential, many smaller companies are frequently disregarded as investor attention concentrates on the larger companies.
This has left high-quality small and mid-caps overlooked and undervalued, creating fertile ground for active managers to buy strong companies at fair prices – an advantage often not available in crowded large-cap markets.
3. The market’s attention is fixated on mega-cap stocks, leaving many excellent businesses overlooked and under-researched.
Equity markets today are more concentrated than they have been in decades. For example, the top 10 stocks account for 39.4% of the S&P 500 and 26% of the MSCI World Index, well above long-term averages. This concentration, led by the so-called ’Magnificent 7’, heightens the risk of relying too heavily on a handful of names.
Small and mid-cap companies thus offer a viable alternative to diversify some of this concentration risk away.
The portfolio has shown resilience and delivered strong returns in its first year.
Over the first year, the Denker Global Opportunities Portfolio returned 11.2% in ZAR to 31 August 2025, compared to the MSCI World Mid Cap Index at +14.2% and the MSCI World Index at +15.7%.
This outcome was achieved in a market environment that was anything but straightforward. In the space of one year, investors had to contend with geopolitical flare-ups, trade policy uncertainty, sharp swings in US interest rate expectations, and volatile currency moves. Against this backdrop, the portfolio’s resilience has been encouraging.
Figure 2: Listed price performance – 31 August 2025 (ZAR)
Source: Morningstar, FactSet, 31 August 2025. Returns for periods shorter than one year are cumulative. Past performance is not necessarily a guide to future performance, and the value of investments may go down as well as up.
The portfolio’s 1-year return of 11.2% is solid, though it lagged the benchmark for three main reasons:
- The initial months saw markets rally strongly following Trump’s election win. Investor appetite for risk surged, with flows favouring mega-caps and more speculative small- and mid-cap companies. As a result, the portfolio saw a number of consumer and more value-oriented stocks (like JD Sports, Kering, Pernod Ricard) fall out of favour, selling off between 10-20%. These stocks have since recovered.
- The portfolio’s holding in diabetes care company Embecta Corporation came under pressure after disappointing quarterly results in late 2024, leading to a material decline in the share price. However, our long-term investment case remained intact, and in 2025 the stock has recovered materially following improved results.
- Since the fund’s listing currency is in ZAR, rand strength reduced returns. Over the year, the ZAR appreciated around 5% against the euro and 2% against sterling, which suppressed reported performance by roughly 1%.
Financials and specific stock selections were the biggest contributors to performance.
The largest contributor to returns came from our overweight in financials, especially European and US regional banks. Several factors supported this performance: strong balance sheets, improved capital returns, continued regulatory easing, and interest rate tailwinds.
At stock level, standouts over the year included:
- Euronext (+57%) – the pan-European exchange benefited from robust trading activity and capital markets exposure.
- Erste Group Bank (+80%) – an Austrian banking group with a strong presence in Central and Eastern Europe.
- TD Synnex Corp (+24%) – a leading global IT distributor and solutions aggregator, performed strongly over the year on the back of a recovery in results and given our sizeable position was a meaningful contributor to performance.
We believe the portfolio is positioned to deliver attractive long-term returns despite short-term market swings.
While in the short run share prices can deviate materially from intrinsic value given investor emotion, our view is that over the long run, the performance of the portfolio will largely be dictated by the per share value created by our underlying companies. This can be reliably measured via either earnings per share or book value per share plus dividends over time.
Assessing this at a portfolio level over the first year of performance, our estimate of the underlying value of the portfolio was +13%. This is in line with what we believe the portfolio should achieve through the cycle and expect it to continue to compound at double digits/low teens in the years to come.
With the portfolio trading on a forward PE ratio of 14.5x at the time of writing, our view is that the portfolio remains very well placed to generate attractive long-run returns.
The portfolio remains concentrated, disciplined, and focused on overlooked opportunities.
Over the past year we’ve kept the portfolio focused and concentrated, with between 25 and 45 holdings (currently around 35). We trimmed or exited our positions in banks such as ABN Amro, Bank of Ireland, and Banco Commercial Portugues after strong rallies pushed valuations closer to fair value.
We also added to our position in Ferguson and initiated a new holding in Daily Journal Corporation (DJCO), a California-based legal-tech and publishing business once chaired by Charlie Munger. The company’s software arm, which helps digitise courts and justice agencies, is a growing and sticky business with long-term upside – exactly the kind of overlooked opportunity we look for.
Valuations, growth potential, and diversification give us confidence for the future.
As we move into the portfolio’s second year, our confidence in this strategy has only deepened. Three factors in particular give us conviction:
- Valuations remain compelling: The portfolio trades at ~14.5x earnings (mentioned above), this is attractive both on an absolute basis, but also when compared with 20.3x for the MSCI World Index and even higher multiples for the S&P 500.
- Growth opportunities are intact: Smaller companies continue to capture market share and compound capital at higher rates over time.
- Diversification benefits are clear: With global markets increasingly dominated by a handful of mega-cap names, smaller companies provide much-needed balance and diversification for investors.
The first year has shown what is possible, and we are excited for what comes next.
Launching a new product is always a leap of faith. But one year in, we feel our conviction has been vindicated. The Denker Global Opportunities Portfolio has delivered on what we promised: a concentrated, high-conviction way to access overlooked global smaller companies.
By sticking to our intrinsic value philosophy – focusing on good business economics, quality management, and fair valuations – we believe we’re uncovering opportunities that will help build long-term wealth for our clients.
The Denker Global Opportunities Portfolio is suitable for long-term investors with an appetite for risk, looking to gain exposure to global smaller companies while investing in rands.
How to access the portfolio:
The AMC is available to investors on EasyEquities and can be accessed here. Alternatively, it can be accessed directly on the JSE via a brokerage account or stockbroker.
Product codes
ISIN: ZAE000337614
Alpha Code: DNKGLO
Product Short Name: UBS DNKGLO
Product Long Name: UBS AMC DNK GLOBAL OPP
For more information:
Please read through the latest product brochure or contact us.
A short overview of actively managed certificates:
What is an AMC?
An AMC is a JSE-listed instrument that represents a portfolio of stocks, actively managed by a portfolio manager according to a specific investment strategy. The returns from AMCs are based on the growth of the stocks in the portfolio, and they are managed by third-party professionals under a robust regulatory framework.
Typical benefits when compared to the more traditional investment vehicles, such as unit trusts and ETFs:
- Smaller investment minimums.
- Cost efficiency, as the costs to run these portfolios are lower.
- Easily tradable and highly liquid.
- Investors benefit from the portfolio managers’ ability to react quickly to market changes, as real-time portfolio adjustments can be made.
- Easy access to global markets without currency conversion hassles or the need to use offshore allowances, as investments are made in rands.
- Essentially, AMCs offer investors an affordable way to access global markets without the administrative burden and tax complexities often associated with direct offshore investing.
They are also well-regulated, as AMCs are issued by banks regulated under the Banks Act of 1990.
More information on AMCs can be found on the Easy Equities website.
