Why Australian small-cap shares are shining

A new report from ASX ETF provider Global X has shed light on the success of ASX small-cap shares this year. 

This has been reflected in the investor activity throughout November. Data shows there has been a surge in small-cap investing amongst ETF investors. 

Outperforming the blue-chips

The Global X Market Scoop report stated that Australian equity ETFs with a size-tilt experienced a notable surge in net flows during November. This reflects growing investor interest in diversifying beyond the large-cap-dominated landscape.

According to the report, after several years in which large caps, such as banks, led market returns, attention is increasingly shifting to smaller and mid-sized companies.

These can offer potential for outsized growth and portfolio broadening. 

Global X said the trend underscores that investors may be looking to capture opportunities across the full spectrum of the Australian equity market rather than concentrating solely on the mega-cap heavyweights.

Whether investors are aiming for the top 300 Australian companies rather than just the top 200, or focusing exclusively on smaller companies, small-caps could be making a comeback.

So far in 2025, these shares have outperformed their large-cap counterparts by 14%. This marks the best relative outperformance in nearly 16 years.

Attracting investor capital 

Global X said this renewed focus has coincided with the launch of several new, more active ETFs targeting small and mid segments. 

This provides investors with targeted exposure and more flexible management strategies. 

For example, the Global X Australia 300 ETF (ASX: A300) was launched in August this year. 

As these products gain traction, small and mid-cap ETFs are beginning to attract capital, suggesting the potential for a rotation or at least a complementary role alongside traditional large-cap allocations.

In November 2025, record inflows of approximately $272 million were seen into Australian small-cap ETFs, underscoring a growing investor appetite for the segment.

How to target small-caps

There are funds that track the 300 largest companies on the ASX, like the previously mentioned Global X Australia 300 ETF or the Vanguard Australian Shares Index ETF (ASX: VAS). 

These give you more access to mid and smaller companies outside the top 200.

However, they do still include a large weighting towards blue-chip stocks. 

For a more specific focus and to avoid crossover into large-cap stocks, there are other ASX ETFs to consider: 

• Vanguard MSCI Australian Small Companies Index ETF (ASX: VSO) – Tracks roughly 180 small-cap companies
• BetaShares Australian Small Companies Select Fund (ASX: SMLL) – Invests in a portfolio typically between 50-100 small-cap stocks that are generally within the 91-350 largest by market cap

The post Why Australian small-cap shares are shining appeared first on The Motley Fool Australia.

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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