Active boutique equities fund manager, Lennox Capital Partners has announced the launch of an Australian microcap fund to complement its high-performing flagship, the Lennox Australian Small Companies Fund.
Lennox was established in May 2017 by James Dougherty and Liam Donohue in conjunction with Fidante Partners, the boutique funds management business of Challenger Limited. The Lennox Australian Small Companies Fund has returned more than 26% net of fees since its inception.
The Lennox Australian Microcap Fund is an actively managed, style-agnostic portfolio investing in a broad range of microcap equities. The fund’s objective is to identify companies with compelling medium-term valuations and minimal short term risk to earnings.
It aims to outperform the benchmark S&P/ASX Small Ordinaries Accumulation Index by owning between 20 and 40 Australian and New Zealand-listed securities (primarily outside the S&P/ASX 200 index).
Mr Donohue said the formation of the new fund was driven by growing investor demand and a desire to seize opportunities in the microcap segment of the market.
“What you find at the microcap and small-cap end of the universe is that some companies are under-researched, so there is plenty of new information to discover and significant opportunities available if you’re willing to do the work”.
Mr Dougherty said the impacts of change within sectors were quite often miscalculated by equity markets in the short term.
“That could be structural change such as technological innovation; it could be cyclical change within an economy; or company specific change. We believe that the information that comes out of that change is processed inefficiently by equity markets and therefore creates mispricing and opportunities for active managers such as ourselves.
“Our strategy for the microcap fund follows the same structured and repeatable process as our small companies fund, with an emphasis on risk management, which is crucial for success in this volatile sector of the market. Our investment philosophy leads us to invest in well-managed, well-governed companies that have forecastable earnings,” he said.
Prior to founding Lennox, Mr Dougherty and Mr Donohue were long-time portfolio managers of the Macquarie Australia Small Company and Microcap funds, which consistently delivered top quartile performance.
Since inception to 31 January 2018, the Lennox Australian Small Companies Fund delivered a net return of 26.41%, 8.48% above the benchmark S&P/ASX Small Ordinaries Accumulation Index.