Datt Capital has launched a new small cap fund which, according to the boutique equity investment manager, will fill a “sizeable niche” for investors who are looking to take advantage of “latent value opportunities” in the small company sector in Australia.
The Datt Capital Small Companies Fund will invest in listed companies outside the S&P/ASX 100 and pre-IPO equities in a limited manner, targeting businesses with the potential for long-term capital growth with an emphasis on quality small company investment exposures.
According to Datt Capital, the new fund will take a concentrated approach, holding between 15 to 25 long equity positions at a time.
Emanuel Datt, chief investment officer of Datt Capital, explained that the firm had applied learnings from its existing absolute return fund to launch the new fund.
“As part of our process of managing the Datt Capital Absolute Return Fund we have been able to identify a number of investment prospects in the small company space and we believe an unconstrained small cap fund will perform well relative to the index,” he said.
“This is particularly appropriate in the current market, given our expectations for small caps to outperform due to their attractive valuations.”
Datt Capital noted that the S&P/ASX Small Ordinaries index is currently trading at a material divergence from the S&P/ASX 200 in terms of valuation. This trend, Mr Datt explained, has previously preceded periods of strong returns by small cap funds.
“The end of zero interest rate policy and the end of the dominance of private market capital presents a smorgasbord of small cap opportunities which are mispriced relative to large cap peers,” he said.
“Historically, small caps have been less efficient than large caps which, while carrying more risks, also provide more opportunity to uncover alpha, especially as these stocks are under researched or entirely ignored by analysts.”
With a minimum investment of $50,000, Datt Capital suggested that the fund is suited to SMSF trustees that are looking to obtain exposure to the small cap sector.
The firm claimed that a specialist small cap strategy to discover and invest in the “blue chips of tomorrow” will provide strong outcomes to Australian investors over time.
Mr Datt also highlighted the Future Fund’s recent decision to allocate capital to active small cap managers, which he said provided “demonstrable appetite and institutional recognition of the present alpha on offer within the Australian small cap space”.
