Small cap managers close to capacity: van Eyk

Strong performances by small cap managers may push established firms close to capacity and pave the way for new boutique managers to enter the market, van Eyk Research believes. 

van Eyk’s head of manager research and deputy chief investment officer, Robert da Silva, said the environment was ripe for experienced Australian equity stockpickers and whole teams to break away from large investment houses and set up their own funds management boutiques, as established fund managers close in on their capacity. 

da Silva identified the strong performance of Australian small cap managers in the past year, combined with steady inflows, which boosted the sector’s funds under management and had pushed some managers closer to capacity. 

“This has created an encouraging environment for new players to emerge in the small cap space,” he said. “Boutiques that have a quality team and investment process, and a consistently strong track record, should do well.” 

While leading funds in the small cap market may be close to capacity, da Silva said there was a significant gap between the top performers and the weakest funds. 

“The consensus view is that Australian shares are close to fair value but there are still opportunities for skilful active managers to add value,” he said.  

“The difference between the best and worst performing small cap manager in the past year was around 40 per cent which highlighted the value that can be added by choosing the right manager. By comparison, the performance differential in the large cap space was around 20 per cent.”