Prime Value said the fund is a newly launched retail offering, built on the same investment strategy and managed by the same 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 will be made accessible to retail investors for the first time under the new structure and name.
The federal government canned the Business Innovation and Investment Program (BIIP), which comprised three major visa streams that provided a pathway to residency in Australia in the 2024-25 Budget, including the SIV.
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,” Ivers said.
“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 added that microcap stocks provide ongoing opportunity to exploit an inefficient part of the market.
“There is a lot of scope for active managers to generate alpha via smaller companies,” Ivers said.
“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.”
Most holdings in the fund are in companies with a market capitalisation below $500 million. The fund targets quality and avoids speculative stocks including mining.
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,” he said.
“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.”
The Prime Value Microcap Fund expects to be available on several platforms soon.