Boutique manager launches microcap fund
Australian active boutique fund manager, Lennox Capital Partners has announced the launch of a new product - the Lennox Australian Microcap Fund.
The new fund would be expected to complement the firm’s flagship Lennox Australian Small Companies Fund which was launched in May last year and which returned more than 26 per cent net of fees since its inception.
The Lennox Australian Microcap Fund, which is an actively managed portfolio investing in microcap equities, would aim to identify companies with “compelling medium-term valuations and minimal short term risk to earnings” and outperform the benchmark S&P/ASX Small Ordinaries Accumulation Index by owning between 20 to 40 Australian and New Zealand-listed securities, the firm said.
Liam Donohue, one of the firm’s founding principals, said: “What you find at the microcap and small-cap end of the universe is that some companies are under-researched, so there is plenty of new information to discover and significant opportunities available if you’re willing to do the work.”
According to him, the impact of change within sectors were quite often miscalculated by equity markets in the short term.
“This could be structural change such as technological innovation, it could be cyclical change within an economy, or company specific change,” he said.
“We believe that the information that comes out of that change is processed inefficiently by equity markets and therefore creates mispricing and opportunities for active manager such as ourselves.”
The strategy behind the microcap fund would be the same “structured and repeatable process” as the one behind the Lennox’ small companies fund and would put emphasis on risk management, crucial for success in the volatile sectors, he said.
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