Shooting the lights out (as an investor) is great, but even many small-cap investors need to strike more of a balance between risk and reward. As a family office structure, Prime Value’s Emerging Opportunities Fund keeps a keen eye on capital preservation and downside protection, while investing in a basket of ex-ASX 100 stocks. “We run a relatively ‘vanilla’ fund in that we don’t use leverage, we simply buy stocks and the cash left over stays in cash,” says portfolio manager Richard Ivers.

While managing risk is key, the fund has also delivered stellar performance over one, three and five years. The Prime Value Emerging Opportunities fund beat its Small Ords benchmark by more than 11% over three years, returning more than 20% (annualised) during the period.

Ivers emphasises his team’s GARP (growth at a reasonable price) approach, which generally targets Australian and New Zealand-listed companies under $4 billion in size. And again, while past performance isn’t a guarantee of future returns, the strategy’s risk-level (volatility) was also around 14% lower than the Small Ords.

Some of the larger positions in the fund are Newscorp (ASX: NWS), which alongside its well-known media businesses include real estate listing firm REA Group (ASX: REA) – the name behind New Zealand-listed logistics company Mainfreight is another core holding of the fund. Both companies are benefiting from the vaccine-led reopening, which has seen the local property sector flourish and demand for parcel deliveries continue pushing higher.

More recent additions to the portfolio include United Malt Group (ASX: UMG) and private health insurer NIB Health (ASX: NIB). While the first of these was hit hard during the pandemic as pubs and restaurants closed, demand is now “expected to rebound as vaccines are rolled out,” says Ivers.

“Even beyond the COVID recovery, it’s a business that can grow at 10% a year compounded, which makes it a very attractive position for us.”

NIB performed well through the pandemic, when membership levels held up and benefited from large numbers of surgery deferrals. Its membership levels have also stayed strong, as health remains a priority for Australians, who are also attracted by the tax-effectiveness of private health insurance.

The Prime Value Emerging Opportunities Fund is open to retail investors and can be accessed via:

Source: Livewire

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