Protecting downside key for top performing small cap fund

From

Richard Ivers

A conservative approach which emphasises capital protection has been key to the Prime Value Emerging Opportunities Fund topping Mercer’s Australian Small Companies (ex-ASX100) survey for performance over three years.

The Prime Value Emerging Opportunities Fund is the only fund in its category to be top quartile in every one of the last three financial years: it was ranked first in Mercer’s Australian Small Companies (ex-ASX100) survey for one year performance in FY2020, and seventh for FY2021; it is now ranked first for annualised performance over three years to FY2022.

Richard Ivers, Portfolio Manager of the Prime Value Emerging Opportunities Fund, says volatility in small caps can be tamed through careful stock selection. “Small caps can be highly volatile. They often fall further in a crash but rebound stronger when things improve.

“But the small cap sector also contains plenty of resilient businesses, which have reliable earnings and can weather market storms.

“By identifying these consistent performers it’s possible to construct a portfolio which exhibits significantly lower volatility levels than the small cap index.”

He said there are ample opportunities for active managers to add value through stock selection in small caps. “The sector isn’t as well covered by the brokers as the larger stocks, and managers can be rewarded by getting out there and meeting different companies.”

The Prime Value Emerging Opportunities Fund has an historical track record of outperforming 82% of months when the index has fallen. “Protecting capital minimises the worst of markets when they come along. But it also allows us to maximise the buying opportunities which emerge during market corrections.

“The key is using these opportunities to find companies which have strong balance sheets, good management and durable businesses, at a better price.”

The Prime Value Emerging Opportunities Fund takes a high conviction, benchmark unaware approach, with approximately $120 million funds under management, and is managed by boutique investment manager, Prime Value Asset Management.

Prime Value Asset Management was founded in 1998 and is part of an investment group including Shakespeare Property Group, managing over $2 billion in equities, income securities, direct property and alternative assets.

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