Australian listed investment company (LIC) Mirrabooka has released its half-year results, indicating positive returns and vindication of the LIC's investment strategy.
Mirrabooka - which invests solely in small and mid-cap companies - recorded an 18.6 per cent portfolio return, outperforming the combined sector index, which was up 9.7 per cent.
The positive results were aided by strong growth in small to mid-cap investment across the board and strong returns in Australian equity markets more broadly over the six months to 31 December 2012. The report suggests the "combined small and mid-cap sectors were up 10.9 per cent over this period."
"We're pleased with the performance of the portfolio relative to the market," Mirrabooka managing director Ross Barker told Investor Weekly. "We've outperformed the small and mid-cap sector."
While he concedes the returns can be attributed partly to overall market conditions, he also said investment strategy, in terms of specific investments, played a crucial role.
"We've tended to focus on companies that have operating businesses with reduced dividends; that's our primary focus and those companies have done well in this environment," Mr Barker added.
In particular, Mirrabooka's holdings in IRESS, Tox Free Solutions and Austbrokers performed well. Returns were also bolstered by the takeover of Hasting Diversified Utilities Fund by APA Group, and the proposed sale and return to stakeholders of the Australian Infrastructure Fund, the report said.
The net result of the half-yearly performance is that the LIC has $24 million available for the second half of the financial year. Mr Barker - who is also CEO of the Australian Foundation Investment Company - says that while he is largely optimistic about prospects in the small and mid-cap market going forward, a number of potential obstacles loom for investors in this space.
"The challenges for the year are going to be that we are in a low-growth environment with a high dollar and the business sentiment isn't wonderfully optimistic at the minute, due to cost pressures and subdued consumer behaviour," he said.
"But on the other hand we've had help come in the form of lower interest rates and the prospect that this might continue in the next six months to a year," he added.
Mr Barker also points out that a federal election could have a positive impact on the investment climate, should it produce a decisive outcome - a result he says would be preferable to the current minority government, which creates uncertainty in the market.
Mirrabooka's reported results follows the initial public offerings announced by small-cap investment funds NAOS Emerging Opportunities Company - the small-cap arm of NAOS Asset Management - and Contango's Mid-Cap Income LIC in December 2012, which Investor Weekly reported added to the sector's renewed momentum.
