Market ‘in flux’ opening opportunities for active small cap managers

Richard Ivers

Active managers are well placed to take advantage of a volatile small cap investing environment, where markets are in a state of flux due to uncertainty about everything from tariffs to interest rates, according to a small cap manager.

Richard Ivers, Portfolio Manager for the Prime Value Emerging Opportunities Fund, said volatility in reporting season was elevated, with big share price moves. “Stocks that ran hard last year when markets were bullish have come off most severely in 2025. This includes high quality, long-term growth stocks.

“This is a function of valuations getting stretched, investors crowding into favourites and expectations the Australian economy will improve, which increases the appeal of more cyclical stocks and provides more competition for the expensive, structural growers.”

Ivers said markets are currently in a state of flux, which creates risks and opportunities for investors. “While interest rate cuts are expected to benefit the Australian economy in 2025, there are also risks to global economic growth driven by US President Trump’s tariff policies.”

In addition, outflows from the small cap sector in recent years have created opportunities for active managers, said Ivers, whose Fund has outperformed the Small Ordinaries Accumulation Index for each of the last seven years. “Change provides opportunity to find companies poised for growth”, he said.

“The biggest driver of outflows for small caps has been the interest rate cycle over 2022-23 when investors took money out of small caps.

“These outflows from small caps provides us with increased opportunities that have been over-looked.

“It allows us to buy quality small cap companies at discounts to valuation and, over time, if our stock selection stands up, these companies will become larger, gather increased index weight and investor love.”

The Prime Value Emerging Opportunities Fund is rated Highly Recommended by Zenith. It delivered 11.3% after fees for the year to 28 February 2025, and 11.3% per annum after fees since inception in 2015.

Prime Value Asset Management was founded in 1998 and is part of an investment group including Shakespeare Property Group, managing circa $3 billion in equities, income securities, direct property and alternative assets.