Lonsec awards Recommended Rating to Perennial Microcap Opportunities Trust
Independent investment research house Lonsec has awarded the Perennial Microcap Opportunities Trust (the Trust) a Recommended rating, complementing Perennial’s investor-centric launch of its micro-stock capability.
Perennial portfolio managers are each investing alongside clients’ monies.
“Investors are perhaps rightly cynical about fund managers’ interests being truly aligned with their own and our portfolio managers have stepped up to the challenge in this new portfolio”, said Brian Thomas, General Manager – Investment Services at Perennial.
“Apart from their investments being aligned, the managers will close the Trust to new investors when funds exceed $150 million.
“It is not in anyone’s interest to have funds grow too large in the microcap sector, and the ability to remain nimble and move in and out of microcap companies starts to become increasingly hindered over this level, Thomas added.
The decision to create the new Trust was based on a painstaking review of 10 years’ worth of data from the Perennial Smaller Companies Trust.
“The results were positive and humbling at the same time” said Andrew Smith, the lead portfolio manager. “Positive in that it showed that the overall return was strong. Humbling because it forced us to reflect on certain decisions that detracted from the fund. On the positive side, this gave us the opportunity to create new processes and metrics to avoid making similar decisions in the new portfolio,” he said.
Mr Smith said the key method of reducing risk was to focus on those companies with minimal debt or ideally large net cash balances (particularly if the company has a limited financial history). Given the almost 2000 companies in our universe we run several screens (on historical and broker forecasts if available) to filter out concept stocks so we can then focus our research efforts on quality ideas in growing sectors.
“In addition to these screens, we are on the road a lot, as a team we conducted over 600 company visits last year. Once we have identified the best ideas we do detailed modelling and put together the best value portfolio of close to 50 stocks,” he said.
Perennial’s preferred stocks at present are RPM Global (software to mining companies), PWR Holdings (high end technology for racing cars) and Imdex (drilling technology provider).
Lonsec rated the Trust Recommended in its review, stating: “Lonsec has strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives. The financial product is considered an appropriate entry point to this asset class or strategy”
The Trust is also available to investors through the HUB24 platform.
