Advance Asset Management has turned to boutiques to provide the investment expertise in its new small companies fund after its existing fund in the sector was partly closed to new money because of capacity constraints.
The St George Bank owned funds management house will launch a new multi-manager small companies fund to advisers this week, with the portfolio to be managed by three relative unknowns — Souls Funds Management, Confluence Asset Management and MIR Investment Management.
The group’s head of product Sue Mieog told Money Management Advance had completed a ‘soft close’ of its existing single manager small caps fund, shutting it off from new money flowing in through platforms. The fund, managed by Jenkins Investment Management, holds approximately $150 million and was quickly approaching capacity in terms of funds under management, Mieog said.
According to the former ING employer super manager, the outlook for the small caps sector was still positive, despite fears it could not sustain its record rate of outperformance.
“A lot of the talk in the market is that small caps have had a good run and people are asking whether they should be putting their money into them now, and we say ‘yes’.”
The sector was expected to return “10 to 15 per cent next year, rather than over 20 per cent, which is still much higher than the broader equities market”.
While the three boutiques managing the new fund are largely unknown, the individuals behind them are not.
MIR is the brainchild of Lazard Asset Management Asia-Pacific founder Michael Triguboff, while Souls, the funds management subsidiary of the Souls Pattinson chemist chain, is run by Frank Villante, the former head of small caps at BT.
Confluence, headed up by Campbell Boag, is part owned by Treasury Group, which also owns a large stake in high profile boutique Investors Mutual.
“One could say they have not been around a long time, so they don’t have much of a performance record. So we have gone back and looked at the people behind them and those people have been outstanding,” Mieog said.
Advance is hoping the fund will attract $100 million over the next year, of which Souls will manage 40 per cent, Confluence 35 per cent and MIR 25 per cent. Mieog said Advance may add a fourth manager to the mix in the future.
“That is why we decided to go with a multi-manager approach with the new fund, so we could have capitalisation flexibility,” she said.
