A fund manager who produced the second best overall return in the industry, with 52 per cent year-on-year (according to Money Management’s Investment Centre), is confident they’ll continue to outperform the market over the coming years, on the back of small caps growth.
Regal Funds Management’s small caps fund outperformed the S&P ASX Small Ordinaries by almost 49 per cent, as they found a number of small and growing companies that were “unappreciated by the market”, the fund manager said.
Regal Asset Management portfolio manager, Todd Guyot, said they found companies with robust growth prospects that were well managed.
He said the companies had strong earnings upside, regardless of the market’s low growth so they bought in. But then the market discovered them too, the companies prices were re-rated, and that pushed the prices up, he added.
“We were lucky enough to find a lot of those,” he said.
Another portfolio manager, Mike Bassett, said they started the fund over a year ago, as there was a massive opportunity in the market, with fewer brokers researching and investing in small caps, despite the massive influx of IPOs.
“All of a sudden there were 100 or 200 stocks to invest in… which gave us better opportunities to find alpha returns as the market go up to speed,” Bassett said.
The fund held no more than 65 stocks, so they could concentrate on “getting returns” and “not take on too much inherit risk”, while they also held short shorts, he said.
“We run what they call a one 30, 30 fund. So we actually have 30 per cent short and we try and make money out of those at the same time, and that gives us a little bit more defence”, Bassett added.
Regal was confident they would continue to outperform the market over the coming years and deliver good performance.
However, they cannot guarantee it will happen every month.
