IML closes door on small cap fund

BOUTIQUE fund manager Investors Mutual will close off its Australian Smaller Companies Fund at the end of the month, in line with a desire to remain small and focused in the belief that large fund managers are cumbersome and ineffective.

Though demand continues for the Investors Mutual small cap fund, it holds close to $300 million in funds under management, an amount the group believes would become increasingly difficult to manage should it grow further.

“If you bring in a manager, hand him a small caps fund, tell him it has $2 billion in it and then tell him to manage it, you are really tying his hands behind his back,” Investors Mutual investment director Anton Tagliaferro says.

Similar feeling resulted in a recent spate of small cap fund closures from managers including Perpetual, ING and JB Were.

Investors Mutual currently holds a total of $1 billion in funds under management and expects to approach a critical mass of $5 billion within five years.

The group first flagged the closure of its Smaller Companies Fund earlier this year when it stopped adding it to the menu of any further master trusts and wrap accounts.

“When you become too big you really do lose the integrity of the process,” Tagliaferro says.

“When your marketing department is about four times the size of your investment team, you probably know you are getting just a bit too big.”

To ensure IML doesn’t travel down this path, it plans to slow general fund inflows over time to control growth by being selective about large cap mandates it receives.