Is this global small-cap fund one to watch in 2024?

Like many other parts of the market, small-cap stocks struggled when interest rates rose and had a difficult 2022, but the prospect of rate cuts has helped them to recover. If central banks, like the US Federal Reserve, ease monetary conditions as expected, then it could result in another profitable year.

One way to benefit would be to consider the Vanguard Global Small-Cap Index, which is a member of Fidelity’s Select 50 list of handpicked funds. It is a passively managed option that aims to provide long-term capital growth by tracking the performance of the MSCI World Small Cap benchmark.

What does the fund invest in? 

The index consists of small-sized company stocks in developed markets, with the fund containing an incredible 4,287 different holdings at the end of December. These had a median market value of £2.6bn and were trading on an average PE ratio of 13.5 times last year’s earnings.¹

Despite being a global benchmark it is dominated by the US, which accounted for 59.4% of the assets at the end of November. This obviously adds an element of country risk to an otherwise diversified portfolio, but could result in higher returns if American small-cap stocks outperform.

How has it performed?

Last year’s gain of 9.27% made up for the loss of 8.55% the year before, yet the longer term record is still very healthy. Over the decade to the end of 2023, the Vanguard Global Small-Cap Index Fund generated a cumulative return of 146.36%, which was marginally behind the 150.4% achieved by its benchmark².

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. The Vanguard Global Small-Cap Index Fund invests in overseas markets and so the value of investments could be affected by changes in currency exchange rates. The fund uses financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This fund invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies. There is no guarantee that the investment objective of any Index Tracking Sub-Fund will be achieved. The performance of the sub-fund may not match the performance of the index it tracks due to factors including, but not limited to, the investment strategy used, fees and expenses and taxes. The Key Information Document (KID) for Fidelity and non-Fidelity funds is available in English and can be obtained from our website at www.fidelity.co.uk. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.