The Prime Value Emerging Opportunities Fund Class B is now available via the Netwealth and HUB24 platforms.
The Prime Value Emerging Opportunities Fund is offered by Australian-owned diversified boutique, Prime Value Asset Management, and was launched in 2015. The Fund was upgraded to Highly Recommended by Zenith in early 2024.
Prime Value introduced the Class B units in February 2024 to cater for interest in the Fund among the intermediary market – the original Class A units invest to an 8 per cent absolute return benchmark.
The Class B units use the Small Industrials Accumulation Index as its benchmark, the most comparable index given the Fund does not invest in mining companies.
The Fund has delivered outstanding returns for investors and was recently ranked third in Mercer’s Australian Small Companies (Ex-100) category for five-year annualised returns to 30 June 2024.
It has outperformed both the Small Ordinaries Accumulation Index and Small Industrials Accumulation Index for each of the last six years.
Prime Value Asset Management Head of Distribution, Mark Jordan, said the Prime Value Emerging Opportunities Fund had differentiated itself as a having the personnel and the process to deliver across varied market conditions. “The small cap team led by Richard Ivers and Mike Younger is outstanding and has a strong track record of managing volatility and delivering performance over many different markets.
“Small cap stocks add an important element to investor portfolios providing exposure to attractive growth opportunities and diversification away from the typical holdings of a large cap portfolio.
“Richard and Mike undertake an intensive company visitation program and apply a thoughtful portfolio construction process to deliver a portfolio of high quality companies.
“We are delighted the Prime Value Emerging Opportunities Fund Class B is now available on the Netwealth and HUB24 platforms, providing more access to the fund for advisors.”
Small caps deliver in any market, but eyes are on a potential shift in rates
A key characteristic of the Prime Value Emerging Opportunities Fund is delivering alpha across varied market conditions – it has produced across bull and bear markets, and during different interest rate cycles.
Much of this consistency stems from stock selection and portfolio construction, according to Mike Younger, Portfolio Manager for the Prime Value Emerging Opportunities Fund. “There’s a great opportunity to add alpha in smaller stocks, for several reasons.
“There are simply more smaller companies, and the more you can increase your investment universe the more opportunity you’ll have to find great companies.
“The superior diversification of smaller companies means you can always find growth segments in just about any economic conditions.
“Small cap stocks are also not as well covered by the brokers, they are not as well analysed, so there are good opportunities for find mis-priced stocks.”
Small cap portfolios can therefore be relatively resilient to shifting market momentum. “We’re focussed on trying to pick predictable earnings, which brings more resilience into the portfolio.”
Recent momentum has not been kind to the small cap indices, due largely to higher interest rates, but the US Federal Reserve’s giant interest rate cut in September signals a potential shift in direction.
Richard Ivers, Portfolio Manager for the Prime Value Emerging Opportunities Fund, said managing down markets carefully is key. “To generate consistent alpha you need to manage the downside well. It is common for small cap companies to underperform during a bear market or interest rate hiking cycle, and that’s why resilient earnings and portfolio construction are so important.
“But we have seen what can happen when the landscape shifts, as we have seen in the USA recently”, Mr Ivers said, referring to US small cap stocks outperforming the ‘magnificent seven’ by 14% when inflation numbers came in lower during August.
“Australia is in a slightly different cycle, with higher interest rates. But it makes the small cap sector really interesting right now, due to significant underperformance versus large caps over the last two years.
“With rate cuts anticipated in 2025 you can see that catalyst coming.
“We know small cap stocks are often the first to run. We can’t predict exactly when that will take place, but when a change in the interest rate cycle is confirmed we can be sure the smaller companies will be on their way.”
The Prime Value Emerging Opportunities Fund (Class A) is currently rated Highly Recommended by Zenith and Recommended by Lonsec and already available on Netwealth, uXchange, Mason Stevens, HUB24, BT Panorama, Praemium, AMP North.
To invest in the Prime Value Emerging Opportunities Fund please contact our Client Services Team at info@primevalue.com.au and 61 3 9098 8088