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.