Richard Ivers

The case for looking beyond the small cap indices for investment opportunities has strengthened following the return of inflation and interest rate rises, according to a small and micro-cap companies investing expert.

Challenging environments often provide a foundation for small cap outperformance given active management is more influential on smaller companies investing, said Richard Ivers, Portfolio Manager for the Prime Value Emerging Opportunities Fund and Prime Value Microcap Fund. “The Small Industrials Index experienced a surprisingly sharp fall in the last few months and is now only +6% in the last six years since the onset of Covid, which equates to 1% per annum. This is despite solid earnings growth over the period.

“Unsurprisingly, there are now many quality smaller companies with resilient earnings which now look more attractive over the medium-to-long-term.

“There are plenty of small and micro-cap companies with relatively reliable earnings well into the foreseeable future, such as those tied to critical infrastructure, which appear more attractive during times of volatility.

“And while this short-term volatility creates some discomfort, it can provide the grounds for future outperformance by providing access to quality companies on sale.”

Ivers said infrastructure assets operating as monopolies with long duration earnings streams looked particularly attractive during economic and geopolitical uncertainty. “These companies include Auckland Airport and Napier Port, with earnings that stretch well beyond shorter term interest rate and oil price rises, and have sold off in recent weeks.

“In addition, there are many small cap companies benefiting from strong structural tailwinds supporting longer term growth – companies such as Regis Healthcare and Pinnacle Investment have a strong long term earnings growth outlook. Both are high quality businesses and down over 30% from recent highs.

“We believe it’s important to focus beyond the short term, and we are more optimistic on the longer term with these companies.

“It’s uncertain when the market will rebound, but it’s typically rapid when it happens, so in our view you invest when the opportunity presents. This is what we’ve been doing while remaining focused on higher quality businesses that can withstand shorter term cyclical headwinds”, Ivers said.

The small cap Prime Value Emerging Opportunities Fund has delivered 10.4% per annum net of fees to investors since inception in October 2015 to 28 February 2025. The Prime Value Microcap Fund only opened to retail investors on 1 July 2025 and delivered 9% to 28 February 2026.

The Prime Value Emerging Opportunities Fund is rated Highly Recommended by Zenith, Recommended by Lonsec, and is available on Netwealth, uXchange, Mason Stevens, Hub24, BT Panorama, Praemium, IconiQ and AMP North. The Prime Value Microcap Fund is rated Recommended by Zenith, Recommended by Lonsec.

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.

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Leanne Pan

Australian dividends are proving their worth as a consistent driver of returns, and can play a role during the current ‘poly crisis’ impacting the world economy and markets, according to a dividends investing expert.

Australian dividend stocks are not always fashionable but remain a powerful strategy, according to Leanne Pan, Portfolio Manager for the Prime Value Equity Income (Imputation) Fund. “Dividends will continue to be the relatively stable component of the equity return in this current poly crisis environment.

“Historically, dividends have contributed significantly to total ASX returns across many cycles. Hence there should always be some dividends in a portfolio.

“But investors need to look beyond the dividend yield alone and consider a total return approach combining both dividend yield and capital growth, to avoid dividend traps.

“Dividends can be financially engineered, so investors need to understand the true drivers of a business, what underpins the dividend and whether it is sustainable.”

Ms Pan said Australian dividend stocks have recently benefitted from the ‘Halo’ trade, where investors have targeted ‘heavy asset, low obsolescence’ stocks, many of which also pay reasonable dividends, due to concerns about software companies being negatively impacted by AI.

“Dividend stocks have been well positioned for this rotation into more mature companies with hard assets, because software companies are not a strong sector for dividend returns.

“But we’re most concerned with the medium-to-long-term, so rather than chase a theme we’re holding a balanced portfolio and seeking out companies with sustainable dividend and medium-term capital growth.”

The recent ASX reporting season also suggested some good news for dividend investors, according to Ms Pan: “The overall impression from reporting was that companies are doing reasonably well, resulting in earnings upgrades going forward.

“The major banks’ strong update numbers surprised the market showing good revenue and no big issues with debts. Of course, in the near term this positive sentiment needs to be reassessed as the Middle East situation unfolds.”

The Prime Value Equity Income (Imputation) Fund has returned a 10.4% per annum net of fees since inception in 2001 to 28 February 2026 – this increases to 12.5% per annum net of fees when franking credits are included. The Fund has delivered a 25.1% per annum return net of fees for the 12 months to 28 February 2026, increasing to 26.7% per annum with franking credits.

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.

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ST Wong

A broader, more diversified approach on the ASX could be more effective in a higher interest rate, higher inflation environment, as investors grapple with the likely impact on the consumer, according to ST Wong, Chief Investment Officer at boutique fund manager, Prime Value Asset Management.

The RBA’s move will introduce a degree of caution for investors, Wong said. “In its latest statement, the central bank cut its economic growth forecasts and is also anticipating a longer horizon to inflation returning towards the mid-point of the RBA’s target 2-3% band.

“Depending on the trajectory of future rate rises, which is now even more dependent on the pace of inflation, economic growth should slow, which will be on the mind of investors.”

The rate rise has come at an interesting time on the ASX where many quality stocks have underperformed. “We’re facing an interesting dynamic where the Australian dollar is climbing higher, and there are many quality companies which have underperformed magnificently.

“These could theoretically represent good buying opportunities, though it’s not a done deal – an attractive valuation will not guarantee future returns. Investors need to choose wisely.”

Wong said shifting from binary to broad thinking could be necessary in this market. “Instead of thinking in binary terms, such as value versus growth, or banks versus resources, consider broad thinking.

“Think broad-based exposure to a variety of opportunities. For example, instead of thinking about the Mag 7 companies the USA or CBA in Australia, both which worked well in 2025, look for opportunities across the market spectrum.

“This could mean some value and growth stocks – both banks and resources. A broad-based exposure to quality companies with good earnings.”

Mr Wong said he would be watching for any possible impact on the consumer. “Higher interest rates will exacerbate the two-speed economy, thereby influencing spending patterns.

“We will be watching for the trajectory of interest rates but also for relief on cost-of-living pressures for the middle to lower income cohort.”

He also said that companies exposed to higher gearing levels are suddenly less attractive. “Late last year the market was talking about potential interest rate cuts, but things can change quickly and it’s hard to justify exposure to leveraged stocks.”

ST Wong manages the Prime Value Opportunities Fund, which is Recommended by both Lonsec and Zenith, and has delivered 9.3% per annum net of fees since inception in 2012 to 31 December 2025.

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

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Mike Younger

Investors in small cap stocks are watching potential interest rate movements in the short-term, but a bigger picture opportunity is being found in value due to the attractive prices for many quality smaller companies, according to an expert in small and micro-cap stock investing.

A shift toward small cap stocks occurred during 2025, yet signs of value remain for those prepared to look actively, according to Mike Younger, Portfolio Manager for the Prime Value Emerging Opportunities Fund and Prime Value Microcap Fund. “We have seen a swift rotation in recent months from investors chasing growth at any price, to chasing more value-oriented names.

“There looks to be good buying opportunities among diverse, quality small cap stocks.

“Small cap profit growth has delivered such that the forward valuation multiple is not as stretched as some might perceive, with the Small Ordinaries index at c16x FY27 P/E.

“The question is whether this continues, particularly with the direction of interest rates being in flux.”

An upwards interest rate move might take the gloss off recent small cap momentum, Younger said, though he still expects to find investment opportunities regardless of any rate hikes. “Rates don’t change the portfolio make-up too much for us. We continue focusing on companies that we see generating a minimum 10% IRR every year, and smaller companies provide greater opportunities to find these gems.

“There are currently opportunities to find higher quality industrial businesses that are growing earnings per share at more than 10 per cent per annum with share prices that are underperforming as investors chase resource stocks.”

Potential for volatility during 2026 could play into an active manager’s hands, Younger said. “Volatility can be an active manager’s best friend, providing dislocations between share prices and the underlying value of a company.

“For example, volatility in 2025 allowed us to add quality telco, TPG Telecom, to the fund, as well as trading around our position in Regis Healthcare.”

Younger said consistency is often underrated in small caps, with smaller company portfolios showing great resilience across various cycles. “There’s a misconception that smaller stocks can be ‘boom-bust’, but with careful portfolio construction it’s possible to deliver consistently across cycles.”

The small cap Prime Value Emerging Opportunities Fund has itself been a picture of consistency, having delivered 11.3% per annum net of fees to investors since inception in October 2015 to 31 December 2025.

The Fund is rated Highly Recommended by Zenith, Recommended by Lonsec, and is available on Netwealth, uXchange, Mason Stevens, Hub24, BT Panorama, Praemium, IconiQ and AMP North.

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(L to R): Richard Ivers & Mike Younger

Small cap stocks are finally enjoying a ‘justified’ turnaround, but investors need to be choosy as some sectors of the market run hot while others still look undervalued, according to Richard Ivers and Mike Younger, Portfolio Managers for the Prime Value Emerging Opportunities Fund.

The duo’s top quartile small cap fund was launched 10 years’ ago this month, in October 2015, and they say recent small cap outperformance versus large cap stocks only partially reverses five years of material under-performance.

“We see fundamental reasons why Small Cap out-performance could continue, driven by much stronger earnings growth and lower valuation multiples. We’re also seeing genuine bull market behaviour in certain sectors with some stocks running hot”, Richard Ivers said.

Mike Younger added: “In hindsight, the small cap industrials index bottomed in October 2023, just as the RBA implemented its final rate hike.

“Since then, this index is +49.7% versus the large cap index +38.6%, but has reversed only a small portion of the small cap relative under-performance over the last five years.”

Mike Younger said stronger earnings among smaller companies were an encouraging sign. “Share prices follow earnings, and there are many stocks where improved earnings are yet to show up fully in the share price, so there are currently some good buying opportunities.

“Macquarie Research estimates that small cap, ex-100 stocks will exhibit much stronger earnings growth over the next few years to 2028, while also trading on lower valuation multiples compared to large cap stocks.

“The smaller end of the market is far more diversified than the top 100 and we’re seeing strong opportunities right across the market, but also seeing potential for risk in smaller, speculative companies running hard”, Younger said.

While it seems small cap stocks should have further to run, Ivers and Younger say investors still need to be choosy and protect the downside when investing. “The last 10 years has shown us to ‘expect the unexpected’. It has also shown that market conditions can swing much faster than previous eras, and that brutal sell-downs can occur when momentum shifts.

“Even in good markets we need to consider portfolio construction, and managing the potential downside so that today’s gains can solidify into genuine long-term performance”, Mr Ivers said.

Keeping an eye on the big picture is key to small cap success, as consistent returns can be found in varied market conditions. “Small cap stocks are an area where good managers can make a difference and generate consistent returns across different markets”, Ivers said.

Younger added: “It’s a great market to be in because there’s always something interesting happening – even if one area of the market is disappointing there will be opportunities elsewhere. It’s the benefit of a broad and deep market of smaller companies, and it’s exciting to find those undervalued companies.”

The small cap Prime Value Emerging Opportunities Fund has outperformed the Small Industrial Accumulation Index for each of the last eight years, and has delivered 11.7% per annum net of fees to investors since inception in October 2015 to 30 September 2025.

It is rated Highly Recommended by Zenith, Recommended by Lonsec, Recommended by Genium (class B) and is available on Netwealth, uXchange, Mason Stevens, Hub24, BT Panorama, Praemium, AMP North and IconiQ.

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.

For more information please contact:

Richard Ivers

Portfolio Manager

Prime Value Asset Management

Phone: 0432 925 146

Email: rivers@primevalue.com.au

David Manallack

Manallack PR

Phone: 0407 334 938

Email: david@manallack.com.au

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Richard Ivers

A shift to small cap companies might be underway yet these companies are still trading at a substantial discount to larger companies, suggesting potential upside for investors, according to Prime Value Asset Management.

Richard Ivers, Portfolio Manager for the Prime Value Emerging Opportunities Fund and Prime Value Microcap Fund, said there are multiple reasons why momentum toward small cap companies is justified. “A confluence of factors has spurred this long-awaited shift to small cap companies.

“Interest rate cuts are providing increased confidence in the economic cycle, and there is a strong historical correlation between rate cuts and performance in smaller companies.

“The momentum gathering in equities markets generally has also boosted confidence in the higher-risk segments of the market.

“And small cap companies are still trading at large discounts relative to large cap companies, and in many cases represent outstanding value.”

Ivers said the recent reporting season showed that, while there was some volatility in results, it was a strong season with good earnings growth for many smaller companies. “We’re finding a lot of smaller stocks that look mispriced to us. And we think small caps generally are due some outperformance as well.

“Companies broadly are seeing resilient spending, but they are optimistic about what is to come given interest rates and the positive impact on consumer sentiment.

“Cyclically, housing stocks are starting to benefit, along with consumer discretionary, and AREITs are also poised to do well.”

Ivers said that while the small cap indices had underperformed in recent years, there were always opportunities to add value through stock picking in any market. “There is such a wide diversification of opportunities in small cap companies that you can always find good opportunities.

“We know that over the longer term there are big advantages in staying invested in this sector, regardless of where the broader market is going. The key is being consistent with your process”, he said.

The small cap Prime Value Emerging Opportunities Fund has delivered 11.8% per annum net of fees to investors since inception in October 2015 to 31 August 2025.

It is rated Highly Recommended by Zenith, Recommended by Lonsec, and is available on Netwealth, uXchange, Mason Stevens, Hub24, BT Panorama, Praemium, and AMP North.

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(L to R): Richard Ivers & Mike Younger

Prime Value Asset Management is opening its Prime Value Microcap Fund to retail investors who wish to capitalise on the strong alpha producing potential of smaller companies on the ASX.

The Prime Value Microcap Fund is a newly launched retail offering, built on the same proven investment strategy and managed by the same experienced team behind the former SIV Emerging Companies Fund. Originally established in 2015 as a wholesale fund designed for Significant Investor Visa (SIV) investors, the strategy has now been made accessible to retail investors for the first time under the new structure and name.

Prime Value Microcap Fund Portfolio Managers, Richard Ivers and Mike Younger, said underperformance in small cap stocks over several years has created attractive valuations. “Some microcap companies are trading at single-digit P/E ratios with double-digit earnings growth and delivering a good dividend yield.

“As the cycle turns these stocks are likely to rebound strongly. It will come quickly. But investors need to be invested first to benefit – once microcaps start running it’s generally too late to get in”, Ivers said.

Microcap stocks also provide ongoing opportunity to exploit an inefficient part of the market, he said. “There is a lot of scope for active managers to generate alpha via smaller companies.

“The Fund is also positioned to capitalise on market swings so investors can enjoy the significant uplift which occurs when microcap stocks run, and we know they can run early and run hard compared to the larger companies”, Mr Ivers said.

The majority of holdings in the Fund are in companies with a market capitalisation below $500 million. The Fund targets quality and avoids speculative stocks including mining. This quality focus is reflected in strong measured risk below the Small Ordinaries index despite focusing on micro-cap stocks, which are significantly smaller stocks than the index.

Prime Value’s Mike Younger said microcaps now resemble small cap companies 20 years’ ago. “These stocks perform in a similar way to small cap stocks 20 years’ ago, they are less researched, less well known, and give managers an opportunity to differentiate and add value.

“There is a ‘sweet spot’ in the lower risk part of the microcap market, via quality companies with resilient earnings combined with a strong growth outlook.”

He said there has been a lot of early interest in the Fund. “There is a dearth of microcap funds generally, and very few which target quality companies and growth while managing downside risk.”

The Prime Value Microcap Fund expects to be available on several platforms in the near future.

Ivers and Younger also manage the small cap Prime Value Emerging Opportunities Fund, which is rated Highly Recommended by Zenith, Recommended by Lonsec, and is available on Netwealth, uXchange, Mason Stevens, Hub24, BT Panorama, Praemium, and AMP North.

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.

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It’s Genium’s first rating for the Fund, and Genium says a Recommended rating reflects its belief that the Fund’s “…strategy has identifiable competitive advantages across several of Genium’s assessment criteria”.

Genium also described Prime Value Emerging Opportunities Fund Portfolio Managers, Richard Ivers and Mike Younger, as “…a commendable pair of investors”.

In its report, Genium said: “Emerging Opportunities mostly avoids the smallest end of the universe, applying its quality- and growth-driven approach with a clear eye on the longer-term outlook.

“We think it’s scalable, fostering confidence that past successes can be sustained.

“This process is sensible and executed methodically”, Genium said.

The Genium Recommended rating follows an upgrade to Highly Recommended by Zenith Investment Partners for the Prime Value Emerging Opportunities Fund in early 2024.

The Prime Value Emerging Opportunities Fund has outperformed the Small Ordinaries Accumulation Index for each of the last seven calendar years with volatility around 20% below the index.

This consistency of performance has come against a varied and often volatile market backdrop including bear markets, bull markets, Covid, low interest rates and high interest rates.

Prime Value Asset Management Portfolio Managers, Richard Ivers and Mike Younger, said change and volatility can bring longer term investment opportunities.

“Markets are currently in flux due to uncertainty and the Trump tariffs, but we know the way forward is to be disciplined and methodical”, Ivers said.

“While there may be some discomfort in the short term we know from previous market cycles that volatility can allow us to buy into quality smaller companies at more attractive prices, with benefits over the medium to longer term.”

Mike Younger said the Fund has a strong track record of being able to capitalise during down markets. “Portfolio construction has been a big driver of returns, and striking a balance between companies with resilient earnings and higher growth stocks.

“We build resilience into the portfolio, which has seen the Fund outperform during down markets about 80% of the time.

“This resilience allows us to capitalise on the opportunities market volatility often presents”, Younger said.

Class B units were introduced for the Prime Value Emerging Opportunities Fund in early 2024, using the Small Industrials Accumulation Index as its benchmark, the most comparable index given the fund does not invest in mining companies.

The Prime Value Emerging Opportunities Fund Class A units has invested to a 8% p.a. absolute return benchmark since inception in October 2015.

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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.

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Mike Younger

A massive divergence in the valuations of small cap companies on the ASX is creating a ‘princes and paupers’ scenario with potential opportunities for active managers, according to a small cap investment expert.

The ‘princes’ are more expensive than they have ever been, while the ‘paupers’ include many good companies which are now very cheap, according to Mike Younger, Portfolio Manager for the Prime Value Emerging Opportunities Fund.

Younger said 2024 was a momentum year. “There has been a big divergence with expensive quality companies at the larger end of the small cap spectrum, and decent smaller companies now cheap.

“Expensive stocks became more expensive, you had exceptional numbers from a few high flyers and there were some that were left behind.

“It’s not a global phenomenon, either. In some cases Australian valuations are through the roof. Some sectors contain stocks trading at 50x earnings, which is interesting when compared to ‘Magnificent Seven’ companies where most trade at 25-30x earnings.

“This makes 2025 a really interesting year. Such divergence creates a good environment for active management in small cap investing.”

Adding to the interest are high bond yields and robust rate cut speculation, Mr Younger said. “Focusing on companies with earnings growth, and having an eye to valuation is key. But it’s a balancing act.

“A catalyst for change could be rate cuts – the cheaper stocks which have a few question marks regarding earnings growth could come back into vogue. Many of these are good companies whose valuations are currently the lowest they have been in five years.

“The elastic band may snap at some point, and you’ve really got to manage that risk and the opportunities.

“Regardless of rates, economy and earnings growth – when there is change, there is always opportunity to find companies with strong growth drivers”, Mr Younger said.

The Prime Value Emerging Opportunities Fund has outperformed the Small Ordinaries Accumulation Index for each of the last seven calendar years. It has delivered 11.6% after fees per annum for the year to 31 December 2024, and 11.4% per annum net of fees to investors since inception in 2015. The Fund is rated Highly Recommended by Zenith.

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

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