As part of Challenger’s restructure to a pure boutiques model in 2010, the firm transitioned its inhouse small companies team comprised of Alex Milton, Sinclair Currie and Lachlan Hughes to a brand new vehicle – NovaPort Capital.
This year they are taking home the title of Money Management/Lonsec Rising Star award, which is attributed to a process which lasted a lot longer than the boutique itself.
NovaPort Capital commenced its operations in January 2011, but its team was always highly regarded by Lonsec. Currie has been a small cap portfolio manager for over a decade, while Milton has been researching small cap stocks since 1992.
Hughes has been working in this sector for four years and, just like his colleagues, comes from a stockbroking background.
“The team’s strong heritage in small cap investing, coupled with a business model that blends the benefits of a boutique (such as majority staff ownership) with the backing and support of an institution in Challenger, and a lack of any capacity issues, forms the basis of Lonsec’s view that NovaPort Capital is the emerging manager of the year,” Lonsec said.
NovaPort runs a process which focuses on a benchmark-unaware and concentrated portfolio, according to Currie.
“What we look for is companies which have got a higher than average quality, where we see a minimum of 50 per cent upside over a three-year time horizon,” he said.
“We see small caps as a game of picking companies which have good quality and good valuation upside, and not so much trying to emulate an index.”
The success mostly comes down to independent research and coming up with investment propositions which are based around making money for NovaPort’s clients “as opposed to worrying about what the index is doing”.
Runner-up in this category is Bennelong Australian Equity Partners (BAEP).
BAEP was established in 2008 by chief executive officer Paul Cuddy and chief investment officer Mark East – in partnership with Bennelong Funds Management.
Cuddy and East have worked together in the five years leading up to the formation of BAEP as co-heads of equities at ING Investment Management.
Cuddy said the biggest challenge the team faced was setting up a business in the second half of 2008, just as the global financial crisis hit the market.
“It doesn’t matter how well you performed, people weren’t going to invest, especially not with a manager that wasn’t very well known at the time,” Cuddy said.
BAEP now managers around $2.6 billion using a “genuinely active” strategy, he added.
Looking at the year ahead, NovaPort’s Currie said investment managers will remain cautious in the next couple of years.
“It’s about selecting your investments more carefully and focusing more strongly on quality, because over time quality businesses will be around for a lot longer and tend to give you a sustainable investment,” Currie said.