In addition, Lonsec has given the Lennox Australian Microcap Fund, which was launched last year, a ‘Recommended’ rating.

Lennox is run and majority owned by principals and portfolio managers James Dougherty and Liam Donohue in conjunction with Fidante Partners, a boutique funds management business and division of Challenger Limited.

In its rating report, Lonsec described the investment team of Mr Dougherty, Mr Donohue and analyst Olivia Bible as ‘high quality’ and strongly aligned to the interests of investors and noted their investment process was well-structured and repeatable.

“Lonsec has very high conviction the financial product can generate risk-adjusted returns in line with relevant objectives. The financial product is considered a preferred entry point to this asset class or strategy,” the report stated.

The Lennox Australian Small Companies Fund provides investors with exposure to a high-quality portfolio of Australian smaller companies. Lennox employs a fundamental bottom-up research effort seeking to identify securities that have been mispriced by the market.

The Fund aims to hold between 20 to 40 stocks and has returned 14.07% p.a. net of fees, as at 31 January 2019, since its inception in April 2017. This is 6.16% more than the S&P/ASX Small Ordinaries Accumulation Index over the same period.

Mr Dougherty said Lennox was delighted to receive such strong recognition from Lonsec. “The Lennox Australian Small Companies Fund inflows are gaining momentum and we are confident the newer Lennox Australian Microcap Fund will also flourish under the same investment approach”, he said.

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 low short-term risk to earnings.

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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.

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Lennox was established in March this year by James Dougherty and Liam Donohue, who are the majority owners, in conjunction with Fidante Partners, a boutique funds management business and division of Challenger Limited.

Prior to founding Lennox, Dougherty and Donohue were long-time portfolio managers of the Macquarie Australia Small Company and Micro-cap funds, which consistently delivered top quartile performance compared to peers.

In its rating report, Zenith said it had “a high regard for the senior members of the investment team given their experience and track record of out-performance” and noted Dougherty and Donohue’s working relationship reduced risks usually associated with a start-up investment boutique.

Dougherty said Lennox was delighted to receive such support from Zenith, especially as its Australian Small Companies Fund was only launched in May. “We have received a strong level of interest since the launch and with this rating hope to maintain that momentum,” he said.

The Lennox Australian Small Companies Fund provides investors with exposure to a high-quality portfolio of Australian smaller companies. Lennox employs a fundamental bottom-up research effort seeking to identify securities that have been mispriced by the market. The Fund aims to hold between 20 to 40 stocks.

The Zenith rating comes after the team recently hired lead analyst Olivia Bible from Moelis & Company, where she specialised in small to mid-sized companies with a consumer discretionary focus. Prior to this Olivia held analyst roles at J.P. Morgan and Bank of America Merrill Lynch.

In the first four months since inception (1 May 2017) the Fund has delivered a total return of 9.36% (after fees) since inception compared to the Small Ordinaries benchmark that has returned 2.96%.

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Established in March 2017, Lennox Capital Partners is majority owned by founding principals, James Dougherty and Liam Donohue. The pair had both worked at Macquarie for over a decade, managing the successful Macquarie Australian Small Companies Fund since January 2012. It is the latest boutique investment manager to be announced under Fidante Partners, the boutique funds arm of Challenger Limited.

The Fund will be seeded by the founders and Third Link Growth Fund, an Australian fund of funds founded by industry veteran Chris Cuffe.

Commenting on the launch, Mr. Dougherty and Mr. Donohue said they were excited to be bringing the new Fund to market.

“Investing in Australian small caps can offer the potential for strong returns from high quality and fast growing companies, in addition to diversification from traditional index heavy weights. Our flagship small cap strategy offers long term investors a great opportunity to benefit from this vibrant and growing part of the Australian economy,” said Mr. Donohue.

Mr. Dougherty continued: “Our structured process and focus on company quality have enabled us to successfully identify compelling small cap investment opportunities over a long time period.

“We invest in businesses with earnings that are forecastable and real. This  approach aims to protect investors from the volatility associated with small companies while capturing the strong returns that are available in this segment of the equity market.”

Lennox Capital Partners’ active bottom-up approach to investing utilises both qualitative screening and in-depth fundamental research to identify investment opportunities. The investment process includes rigorous, deep-dive research ‘on the ground’.

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