Following a successful 12-year track record researching and investing in the Australian microcap sector, Acorn Capital has launched a new Asian small cap strategy, which will invest in small listed companies in Asia (excluding Japan).
Acorn Capital, Australia’s largest microcap investment manager, spent three years researching the Asian small cap market before the launch of the AU Acorn Capital Asia Small Cap Fund.
The fund seeks to exploit inefficiencies in the pricing of small cap stocks in the Asian region, with the aim of outperforming the MSCI AC Asia (ex Japan) Small Cap Index (A$) over rolling five-year periods.
Its investment universe is small companies that fall into the 85th to 99th percentile by market capitalisation in Asia (ex Japan), listed on stock exchanges in China, Hong Kong, India, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan and Thailand.
Douglas Loh, Acorn Capital’s head of Asia, said that there are excellent opportunities in the Asian small cap sector that Acorn Capital can identify through its rigorous research process, which has already delivered consistently strong returns in the Australian microcap sector.
“Research has shown that Asian markets are not as efficient at pricing stocks compared to Australia, creating information gaps.
“We believe that this inefficiency provides research-focused investment managers such as Acorn Capital with the ability to create long-term capital growth for investors.
“Our investment strategy is simple: firstly, to remain fully invested across all industries in the region (without taking industry bets); and secondly, to select the best-of-breed investments by industry through stock-picking in a systematic way.
“We’ve used this approach successfully in Australia for the last 12 years and our research indicates we can replicate this success in Asia.”
He added that although Asian stock markets (ex Japan) account for more than 20 percent of the value of world stock markets, they represent less than 10 percent of the MSCI World Index.
“This under-representation leads to lower funds flowing into the Asian equities market, a factor contributing to the opportunity in Asian markets,” Mr Loh said.
Acorn Capital conducted an extensive global search to recruit the most appropriate investment professionals to support the strategy, and has built a team of seven dedicated investment professionals, who have extensive experience in Asian markets and are fluent in multiple Asian languages.
Mr Loh said that the first two years of work were focused on researching and understanding the market nuances of the Asia small cap sector, including running portfolio simulations to test the investment strategy and market liquidity, to ensure Acorn Capital can add value for investors.
“Over the past year, the investment team has conducted detailed company research and analysis, and has made more than 18 overseas research trips.
“This has resulted in over 60 visits to individual countries, more than 270 meetings with companies on the detailed research list, and some 200 other meetings to develop and enhance industry and country knowledge.
“Based on this extensive research, we are now in a very strong position to launch the AU Acorn Capital Asia Small Cap Fund to the Australian market,” Mr Loh said.
The portfolio will be unhedged for foreign currency exposures and will comprise approximately 80 stocks. No single stock holding will exceed 7.5 percent of the portfolio.
The fund is open to new applications with a minimum initial investment of $5,000.
Acorn Capital Ltd is a specialist investment manager investing in small and microcap companies traded on exchanges in Asia (ex Japan) and Australia. It was formed in 1998 and Australian Unity Funds Management (AUFM) became a joint venture partner in December 1999.
The Acorn Capital Microcap Composite Portfolio has returned 13.7% percent per annum (pre fees) since inception over the last 12 years to 31 October 2012.
For further information, please contact:
Douglas Loh – Phone: (03) 9639 0522
21 November 2012