Contango Asset Management is set to launch a micro-cap listed investment company (LIC) in March — a move adding to the swarm of LIC investment vehicles that have hit the market over the past six months.
Contango MicroCap will invest in domestic stocks with a market capitalisation ranging from $10 million up to $200 million – predominantly those stocks between theS&P ASX300 and the S&P ASX 500 according to Contango Asset Management managing director David Stevens.
“The micro-cap sector is an important source of capital to new and growing industries as well as industries that have temporarily fallen out of favour.”
“For liquidity reasons, the professional market tends to focus on larger capitalisation stocks. This bias is reinforced by the futures index being based on the S&P ASX 200. As a result, the micro-cap sector tends to be under researched and can offer attractive investment [mis-pricing] opportunities,” Stevens says.
Contango MicroCap will aim to raise $75 million with shares priced at $1 and including an option to acquire further stock in September 2005.
Stevens says LICs have been well received by the market with many trading at a premium and demand for these vehicles remaining strong.
Contango will manage a diversified portfolio of approximately 50 securities utilising its business cycle styled investment approach, which it adopted back in the early 1990s.
According to Stevens, the composition of the micro-cap sector differs markedly from the S&P ASX 200.
“In particular, it has significantly higher weights to industries such as telecommunicatons, tech hardware and software, pharmaceuticals and biotechs as well as gold, diversified financials and health equipment,” he says.
