Q: In responding to a question regarding ZSML in Nov 2021 you stated "While volume is low, it has $351M in assets, and is likely quite profitable for the bank at that level." I see that, according to TDW, it now has $166.2M in assets. At this lower level would you still see it as profitable for the bank? Are the assets lower due to investors selling units? You have indicated recently that small caps could be coming into their own, so is ZSML a good option to add to my small caps at this time? Many thanks.
5i Research Answer:
Break even levels vary, but we would expect this is profitable for the bank even at $50M in assets. Small caps have not done well (until recently) and withdrawals/selling has resulted in the decline in assets. Its three year return is 4.83%, so many unit holders likely switched to large cap funds during that period. Today we would consider it fairly attractive for an expected (but not guaranteed) small cap recovery as interest rates move lower.