Seth Hoskin

ICE Investors has appointed Seth Hoskin to the role of deputy portfolio manager, effective 1 June. He will be based in Melbourne and will report to ICE Investors, managing director and portfolio manager, Callum Burns.

He joins ICE Investors from Foresight Group where he worked as an investment senior manager and co-fund manager for three years. Prior to that he was a small cap equity analyst at Canaccord Genuity Australia and Forsyth Barr Limited. He started his career as a research analyst at the University of Otago.

Burns says Hoskin’s appointment adds an additional resource to the investment team, strengthening the firm’s expertise in small cap funds management. He will be part of the research and stock selection for the ICE fund, an actively managed Australian equity fund.

“His experience and knowledge of both small caps and experience investing globally will be an asset to our team, broadening our scope to cover off more of the small cap universe.

“Seth brings with him valuable experience and has a proven track record of stock picking backed by in-depth research and due diligence.

“He will be involved in finding new investment ideas and opportunities to add to the portfolio and in turn providing greater returns for our clients.

“Seth’s professional and approachable style will be a value-add for both our clients and is a great cultural fit for our team,” says Burns.

Hoskin holds a Bachelor of Commerce, Economics and a Master’s degree in Finance from the University of Otago.

This appointment follows the promotion of Roman Aliev to Portfolio Manager earlier in the year.

Callum Burns

The significant market volatility in 2025 creates a buying opportunity for investors keen to diversify their portfolios to take advantage of the attractive entry points for small companies, according to Callum Burns, portfolio manager at ICE Investors.

“We are seeing a significant opportunity in Australian small caps due to the underperformance of small companies in recent years when compared to large caps. This presents an enhanced opportunity for investors keen to broaden their diversity out of the large cap banks and miners, which still take up a large portion of many investors’ portfolios,” he said.

“In this environment, small caps offer greater diversification opportunities for investors, extending beyond broad market trends and traditional blue-chip shares, such as the big banks and big miners.  In addition, in many instances small caps are less impacted by potential tariffs than large caps.

“Moreover, we see good value in small caps. The extreme underperformance of small caps versus large caps, coupled with historical trends, indicates good timing to buy into small companies. By focusing on companies with robust business franchises with durable economic moats, investors can leverage the potential for persistent earnings growth and superior long-term returns,” he said.

Robust business franchises are characterised by several key features, including companies with difficult to replicate assets, such as licenses and brands, a good quality management team, an entrenched customer base, a sustainable competitive advantage and barriers to entry for new competitors, which helps to establish an economic moat and pricing power. 

In essence, companies exhibiting these characteristics are more likely to achieve strong share price growth and outperformance over the long term, outpacing lesser-quality small caps and even large caps. These are quality businesses poised for durable growth, Mr Burns says.

For example, EBOS and Paragon Care are key players in pharmaceutical distribution, a sector defined by scale, compliance, and reliability. The infrastructure and logistics expertise required to operate effectively as the premium operator in the case of EBOS and as the low cost operator in the case of Paragon in this space create barriers to entry. As a result, each benefits from a defensible market position and recurring revenue streams, reinforcing their investment attractiveness.

Mr Burns also believes in the potential of artificial intelligence (AI) to create new business opportunities for companies. 

“We believe that AI can help to promote structural changes that lead to new business franchises and enhance the operations of existing companies’ operations. Within our portfolio companies, AI can help to automate and cut costs for insurance brokers, such as Ausbrokers. It can also help lead to differentiation of existing products and offer improved efficiencies, for example for retailer Temple & Webster,” he said.

“Our focus is on companies with an economic moat. We look for businesses with assets that are difficult to replicate, where the company enjoys sticky customers and produces a product or service with a repeating business with the client, and where we can identify the potential for an attractive internal rate of return over the medium to long horizon at the right price. 

“To identify these companies takes the expertise of a fund manager experienced in the small cap space, who can conduct in-depth research to reveal these hidden gems,” Mr Burns said.

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Callum Burns

The significant market volatility in 2025 creates a buying opportunity for investors keen to diversify their portfolios to take advantage of the attractive entry points for small companies, according to Callum Burns, portfolio manager at ICE Investors.

“We are seeing a significant opportunity in Australian small caps due to the underperformance of small companies in recent years when compared to large caps. This presents an enhanced opportunity for investors keen to broaden their diversity out of the large cap banks and miners, which still take up a large portion of many investors’ portfolios,” he said.

“In this environment, small caps offer greater diversification opportunities for investors, extending beyond broad market trends and traditional blue-chip shares, such as the big banks and big miners.  In addition, in many instances small caps are less impacted by potential tariffs than large caps.

“Moreover, we see good value in small caps. The extreme underperformance of small caps versus large caps, coupled with historical trends, indicates good timing to buy into small companies. By focusing on companies with robust business franchises with durable economic moats, investors can leverage the potential for persistent earnings growth and superior long-term returns,” he said.

Robust business franchises are characterised by several key features, including companies with difficult to replicate assets, such as licenses and brands, a good quality management team, an entrenched customer base, a sustainable competitive advantage and barriers to entry for new competitors, which helps to establish an economic moat and pricing power. 

In essence, companies exhibiting these characteristics are more likely to achieve strong share price growth and outperformance over the long term, outpacing lesser-quality small caps and even large caps. These are quality businesses poised for durable growth, Mr Burns says.

For example, EBOS and Paragon Care are key players in pharmaceutical distribution, a sector defined by scale, compliance, and reliability. The infrastructure and logistics expertise required to operate effectively as the premium operator in the case of EBOS and as the low cost operator in the case of Paragon in this space create barriers to entry. As a result, each benefits from a defensible market position and recurring revenue streams, reinforcing their investment attractiveness.

Mr Burns also believes in the potential of artificial intelligence (AI) to create new business opportunities for companies. 

“We believe that AI can help to promote structural changes that lead to new business franchises and enhance the operations of existing companies’ operations. Within our portfolio companies, AI can help to automate and cut costs for insurance brokers, such as Ausbrokers. It can also help lead to differentiation of existing products and offer improved efficiencies, for example for retailer Temple & Webster,” he said.

“Our focus is on companies with an economic moat. We look for businesses with assets that are difficult to replicate, where the company enjoys sticky customers and produces a product or service with a repeating business with the client, and where we can identify the potential for an attractive internal rate of return over the medium to long horizon at the right price. 

“To identify these companies takes the expertise of a fund manager experienced in the small cap space, who can conduct in-depth research to reveal these hidden gems,” Mr Burns said.

The post Small caps set to outperform large companies on the ASX appeared first on AdviserVoice.

Callum Burns

Investing in small-cap companies can be considered a risky proposition, but it can also be a very rewarding one; the key for investors is to identify quality small caps that have the potential to become tomorrow’s top performing companies, according to Callum Burns, managing director & portfolio manager at ICE Investors.

Mr Burns says not all small caps are created equal and there is a significant performance dispersion between small companies. Many either fail to thrive or underperform. However, focusing on high-quality small companies with strong competitive advantages can yield significant long-term value for shareholders.

“The small-cap universe can be a significant challenge. There are a lot of opportunities out there, but there are also many pitfalls. This is why a careful, methodical approach to stock selection is extremely important in small cap investing. There are around 200 companies in the ASX Small Cap Index, and many more not even in the index, yet many of these companies are not attractive from an investment point of view,” he said.

According to research conducted by the ICE Investors team, the “sweet spot” of small cap investing can be found within a high-performing subset – the potential future top 100 companies —those companies with robust business franchises.

“Companies with strong competitive advantages are more likely to succeed in the long run. They are also more likely to be quality companies that can weather future economic storms,” he said.

Mr Burns said that one of the most important things to look for in a small-cap company is a strong competitive advantage. This could be anything from a unique product or service to a brand or unique infrastructure.

“Robust business franchises are characterised by several key features including having an economic moat around the business that protects revenue from competitors; difficult to replicate assets, such as licenses and brands; barriers to entry for new competitors; an entrenched customer base that faces obstacles in switching to competitors; sustainable competitive advantage and pricing power.

“With a focus on firms with strong business franchises, investors can tap into the potential for substantial outperformance and avoid lower quality companies that may lead to underperformance and ultimately, poor returns over the longer term.

“By undertaking comprehensive research and proper due diligence, investors will be better equipped to identify tomorrow’s top 100 companies,” he said.

Despite the potential of small caps for long-term growth, the S&P/ASX Small Ordinaries Index has shown significant underperformance of the S&P/ASX 100 index since early 2022, as highlighted in the chart below. According to Mr Burns, this dislocation in performance remains in place today, however the ICE Investors team believes this is only a temporary dislocation and that investing in small companies with strong business franchises can yield dramatically different outcomes over time as illustrated by the team’s research into the sector.

“This is demonstrated by looking at data over the last 20 years which shows that small companies with strong business franchises consistently deliver superior returns compared to the broader small-cap universe and the overall share market,” he said.

As the above chart highlights, the small cap businesses with solid franchises represented by the blue line provide superior risk-adjusted returns due to their robust business models and consistent earnings growth. In contrast, lower-quality small caps, represented by the lavender line, generally exhibit weaker prospects and less durable growth.

“There are still many great small-cap companies out there waiting to be discovered. However, investors need to be equipped with the right research and due diligence to differentiate between low-quality small caps, with little potential to outperform, from the next top 100 companies.

“Our investment approach at ICE Investors, helps us to differentiate and identify the next top 100 in the small caps space by finding strong business franchises with a solid competitive advantage and strong prospects to outperform in the long term,” said Mr Burns.

Callum Burns

While small capitalisation stocks have significantly underperformed large companies since the start of 2022, many quality small cap companies possess superior earnings profiles to large companies and have been indiscriminately sold down.

That’s the conclusion reached in The Small Cap Dislocation, a new research paper which assesses the performance of the Australian small caps sector.

The research separates companies of the ASX/ S&P Small Industrials into two halves – one half consisting of higher-quality companies with superior earnings growth, profit margins and debt profiles, and the other half consisting of lower quality companies.

It found that while low-quality small cap companies deserve to have underperformed the S&P/ ASX 100 Industrials Index, the higher-quality half of small caps have been oversold versus large caps.

Earnings growth, debt levels and profit margins of these companies compared to the S&P/ ASX 100 Industrials are typically more favourable and, therefore, the large underperformance of this quality group of small companies since 2022 versus large caps stocks is unjustified.

The ASX/ S&P Small Industrials Index was chosen as the control group to focus on the underlying drivers of small companies. The group was split into five quality categories, including ‘best franchises’, ‘solid franchises’, ‘typical company’, ‘below average company’ and ‘challenged and/ or loss-making’. The consensus forecast earnings growth for the year ending June 2024 was then obtained for each company across each category, and the median was calculated for each Small Industrials quality category. The same process was repeated for the Top 100 Industrials.

The earnings growth in the higher quality half of the ASX/ S&P Small Industrials is superior to that of the same quality categories in the Top 100 and superior to that of lower quality companies, whether in the Top 100 or Small Industrials. This suggests for the higher quality categories in the Small Industrials Index, the underperformance of this group since the start of 2022 is not justified.

The median quality small cap franchise in the higher quality half has better earnings growth, slightly lower debt levels and slightly higher profit margins than Top 100 companies. In contrast, earnings growth in the lower quality half of the Small Industrials is materially inferior to that of the same quality categories in the Top 100.In aggregate, the three lower quality categories have uninspiring earnings growth and trade at a discount

The findings of the research illustrate that the more challenging investment environment since the start of 2022 has unsettled investors. As a result, they have responded by buying into the perceived safety of large cap stocks and overlooked indiscriminately sold down small caps.

The sell-off in quality small companies has opened up attractive buying opportunities for shrewd investors prepared to do the work and potentially unearth quality companies with robust earnings growth, good profit margins and low debt levels – something investors in all segments of the market should be aiming for.

By Callum Burns, managing director and Roger Walling and Mason Willoughby-Thomas, portfolio managers 

Callum Burns

Lead indicators are pointing to a more uncertain and challenging period for broader Australian equities, and while some headwinds will persist, there are opportunities for investors in smaller companies, according to ICE Investors managing director and portfolio manager, Callum Burns.

“Investment markets are undoubtedly in a more uncertain and difficult point in the cycle however this can result in stock opportunities that would not otherwise arise.

“Investors can become too focused on the short-term picture however we focus our attention on the long-term compounders.

“If you can maintain a longer-term view and keep your eye on the price, you can use the conditions to your advantage,” he said.

Mr Burns believes that along with strong balance sheets, pricing power is a critical stock attribute in an uncertain environment, and is on offer in select parts of the small cap sector.

“Pricing power is essential for companies to be able to maintain margins and speaks to the strength of a company’s competitive advantage which is a key driver of their ability to capture market share from competitors. A good example of this is EBOS Pharmaceuticals, which gained market share from competitors during and post COVID.

“When prices are rising, you increase your own to mitigate those cost pressures but the companies that are genuinely differentiated and with loyal customers, they’re faring the best.

“Also, top quality franchises at good prices are more readily available when investors are anxious, so be mindful of the challenges, but equally, be open to an environment that typically creates opportunities,” he said.

The SGH ICE Fund has recently had its highly recommended rating by Lonsec reaffirmed and received a Morningstar Analyst RatingTM of ‘Gold’ (as at 8/10/2022), the latter of which described the fund as having a “superb strategy” and one that “rises as one of our top picks in the Morningstar Category.”

The Morningstar Managed Investment Report read: “SGH ICE is an excellent strategy backed by a strong team and repeatable investment process.

“In the 10 years to August 2022, the strategy has handily beaten both the S&P/ ASX Small Ordinaries and S&P/ ASX 300 indexes on a total return and trailing returns basis.

“It has also outpaced the equity Australia mid/ small-growth category average over the past 10 years, and returns on a risk-adjusted basis are solid. Stock picking has been the main driver of performance.”

ICE Investors is a boutique fund manager based in Melbourne, specialising in franchise style investing in Australian equities.

Mr Aliev was previously employed with Franklin Templeton Investments – Global Equity Group as a research analyst for eight years. Prior to this he held research positions with Mercer Investments and AXA Australia.

He holds a Bachelor of Commerce (Hons) from the University of Melbourne and is also a CFA Charterholder.

Mr Burns said the appointment reflects both the capabilities of Mr Aliev and also the demands of the current market environment.

“Given the uncertainty in the market and the need to identify sound, long-term stock opportunities, Roman joins the business at an opportune time.

“He is a passionate investor and a high performing global equity research analyst, with strong experience covering a wide range of geographies and sectors.

“His analytical experience and focus on identifying companies that are well positioned to grow shareholder value over the long term make him a good fit for the investment team.  We’re looking forward to having Roman join the team,” he said.

ICE Investors’ SGH ICE fund is a benchmark unaware fund that has a strong long term track record since its inception in 2006. It is an actively managed predominately small cap equity fund, that aims to invest in ASX listed franchise companies with a sustainable competitive edge.

The Fund currently holds 39 stocks which are a mix of longer-standing companies growing at a steady rate, and those that have been advantaged by the pandemic and experienced more significant growth as a result.

The underlying philosophy of the investment team is to focus on franchise companies with a durable competitive advantage, organic growth opportunities, appropriate debt levels and strong cash flow generation.

“We look for franchise companies that have high barriers to entry and use assets that are difficult for competitors to replicate. This typically leads to strong pricing power and, most importantly, sticky customers,” Mr Burns said.

“Inflation will continue to have an impact on markets, and the key risk to margins is not being able to pass on material or labour costs. As pricing power is such a key element of our investment process, many franchise companies are well suited to this market environment. We’re continuing to identify opportunities for the fund,” he said.

Stocks currently favoured by ICE Investors include Ooh Media (ASX: OML), carsales.com (ASX: CAR), Steadfast Group (ASX: SDF), and medical supplier, EBOS Group (ASX: EBO).

According to Mr Burns, the appointment reflects the recent strong performance of the SGH ICE Fund and growth prospects within the small cap sector of the market.

“With substantial experience in asset management, Mason is an excellent fit both culturally and from an investment philosophy perspective. He has a proven track record in being able to achieve strong returns and understands the demands of a retail client base.

“His appointment places the ICE Investors team in a very strong position to continue to deliver superior investment performance for our clients,” he said.

Prior to joining ICE Investors, Mr Willoughby-Thomas was senior co-portfolio manager of the Ausbil Investment Management small and microcap funds. He was also previously employed as portfolio manager/ senior analyst at Australian Ethical Investment and held analyst positions at ING Investment Management and AMP Capital Investors.

He holds a Bachelor of Commerce with honours from the Australian National University and is a Chartered Financial Analyst.

Mr Burns said the appointment of Mr Willoughby-Thomas comes at an opportune time for the domestic small cap sector, with certain industries poised for particularly strong growth.

“Companies connected to pharmaceutical distribution, cloud software, online services and food are likely to do well as the economy reopens. We’ll be continuing to focus on franchise companies with a durable competitive advantage, organic growth opportunities, appropriate debt levels and strong cash flow generation he said.

SGH ICE is a benchmark unaware fund, but draws most of its investments from Small Industrial stocks which have outperformed during COVID-19 and over the long term.

It currently holds 43 stocks which are a mix of longer-standing companies growing at a steady rate, and those that have been advantaged by the pandemic and experienced even more significant growth as a result.

Callum Burns

Lonsec has awarded a ‘Highly Recommended’ rating to the SGH ICE Fund for the fifth year in a row. The rating indicates that Lonsec has very strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives.

SGH ICE portfolio manager, Callum Burns, said for the year to September the Fund was pleased to deliver a positive return and grow clients’ wealth in a market where the key market indices delivered material declines.

“Our franchise process has been proven over the long haul and we remain focused on executing our franchise strategy for the benefit of clients,” he said.

The SGH ICE Fund aims to deliver positive long-term returns by investing in a portfolio of predominantly mid to small cap Australian equity industrial ‘franchise’ businesses. Franchise companies are those that display a sustainable competitive advantage due to owning assets that are difficult to replicate, operating those assets with the objective of entrenching the company’s market position, augmented with a distinguishable moat.

“Companies with these attributes typically deliver more sustainable earnings growth,” Mr Burns said.

In its research report, Lonsec noted that the strengths of the Fund include portfolio manager, Callum Burns, who is a “high calibre investment professional”, and architect of the strategy. It said the Fund had a well-structured investment process that combined a focus on ‘franchise’ investing with strong valuation discipline, and a robust portfolio construction framework.

It also noted the investment team has a strong alignment of interests with investors.

“The Manager has established a broad research universe of companies for consideration,” Lonsec said.

“This comprises the S&P/ASX Indices plus ideas generated from the Manager’s network of contacts (corporate contacts, personal contacts, brokers, competitor companies, investment reading and quantitative diagnostics). This universe comprises approximately 450 stocks and is much wider than a typical small cap investment manager in Lonsec’s peer group.

“The Fund is managed in a ‘benchmark unaware’ manner and has a ‘GARP’ and ‘quality’ bias. The Fund is well-diversified (approximately 40 stocks at present), with portfolio turnover typically being 30-60 per cent p.a.

“The Manager expects the Fund’s returns to be delivered with less volatility (as measured by Standard Deviation) than the Index and this has been achieved.”

The Lonsec report concluded the Fund’s ‘franchise’ approach was logical, highly repeatable and embedded a robust sell discipline in the research process. The report also highlighted the attractive ‘boutique’ structure, which included a strong alignment of interests with investors.

Callum Burns

While the ASX100 companies in aggregate have struggled to grow earnings, there are many other companies with sustainable long-term earnings growth outside of this cohort, says SG Hiscock’s Callum Burns, portfolio manager of the SGH ICE fund.

“Some investors are focused on market movements and volatility, and how low the market can go. Our focus is less on the market as a whole and more on stock picking, and finding value,” Mr Burns says.

“This is not a new concept. It has been the case for the 10 years that the SGH ICE fund has been established. It is only now that markets are volatile and the return outlook from large cap companies is less certain, that consideration of alternative ways of generating long-term sustainable return have come to the fore.

“The key for us to investing for sustainable future growth is to look for good quality companies with a business franchise with a sustainable competitive advantage where it is difficult for clients to discontinue using the product or service.

“Companies displaying these characteristics are typically outside the top 100 and tend to deliver more certain earnings growth than those that don’t.”

Mr Burns says now is the right time to be focused on individual companies.

“We see that there are opportunities for a significant number of ex-ASX100 companies, regardless of the broader market environment.”

The success of this approach has been demonstrated by the capability of SGH ICE, which over the past 10 years has outperformed on a total return, and a risk-adjusted, basis.

In the 10 years to end of February 2016, the ICE fund has returned 12.2 per cent a year with a level of risk (as measured by standard deviation) of 15.6. In contrast, the the Small Ords has returned 0.4 per cent a year with a standard deviation of 19.6. while the ASX300 over that period has returned 4.3 per cent a year with a standard deviation of 14.4.

“The key difference is active management with investment in quality business franchise companies. We have found that companies that have a competitive advantage tend to perform better in uncertain environments, but that investors often underestimate the power of this advantage.

“There continues to be a significant difference in performance between those companies with a structural advantage whose operations are doing well, and mediocre companies. As a result, it remains a stock pickers’ market.

“With low or no earnings growth in the large cap stocks experienced in recent times, advisers are increasingly looking further afield for attractive opportunities with many investors prepared to discount the risk being taken for returns.”

Mr Burns says there is increased adviser interest in small cap funds. The SGH ICE fund, has recorded significant inflows over the last twelve months and has recently been added to the MLC Wrap as well as the model portfolios of IOOF’s Bridges and Consultum businesses.

“Over the 10 years that the fund the has been running, we have seen ebbs and flows in the popularity of small caps. But with growth in the large end of the market volatile and uncertain, there has ben a renewed interest in small caps.

“There are definite opportunities outside of the ASX 100 and there is no question that small cap stocks have delivered some good returns to investors in recent times. But those embracing small caps for the attractive opportunities they offer for greater returns, should also be mindful of the risks.

“There are hundreds of stocks in the small cap universe, covering a diverse array of industry sectors. The companies are spread across the lifestyle spectrum from early start up to growth to the peak of cash generation and to maturity.

“But the returns are only half of the story. The level of risk taken to achieve those returns needs to be a focus as well.

“Diversification is also a critical aspect, and taking a whole portfolio approach with many shots on target is the most reliable way to achieve strong risk adjusted returns.

“The focus needs to be on the better quality small cap stocks.”

SG Hiscock & Company is a boutique investment manager established in 2001 and 100% owned by its staff. It has a broad range of funds and a mix of some of the largest wholesale clients in Australia. The customer base also includes a large number of high net worth and retail clients who predominantly invest through financial planners and platforms.

Callum Burns

SG Hiscock’s SGH ICE fund has been added to the Asgard platform. The fund, which was launched in 2006, has $200 million in funds under management and is distributed by Equity Trustees.

SGH ICE typically invests in mid-to-small cap industrial franchise companies listed on the ASX that deliver robust earnings growth.

Callum Burns, portfolio manager, said that the addition reflects growing interest in, and support for, funds that look outside the mainstream ASX100 for Australian equities investments and who adopt the franchise investing style.

“We believe that the fund is well placed to perform in a variety of market conditions and offers a unique way to gain exposure to a truly diverse portfolio of quality companies with growing franchises.”

Demand for the addition also came off the back of Lonsec upgrading its rating for the SGH ICE Fund to ‘Highly Recommended’ earlier this year. In its report, Lonsec said that the strengths of the Fund include Portfolio Manager Callum Burns, who “is a high-calibre investment professional.  As architect of the strategy, he has significant tie-in to the investment philosophy”.  The fund also won both industry awards for Small Companies Fund manager of the year awards this year.