Acorn Capital is launching into the Asian small cap sector with a new fund opening up Australian investment options in the region.
The Acorn Capital Asia Small Cap strategy will "exploit inefficiencies" in the pricing of small cap stocks in Asia, which sees information gaps created in Asian markets.
"We believe this inefficiency provides research-focused investment managers such as Acorn Capital with the ability to create long-term capital growth for investors," Acorn Capital head of Asia Douglas Loh said.
"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."
The Asian small cap portfolio will be unhedged for foreign currency exposures and will comprise approximately 80 stocks from companies that fall into the 85th to 99th percentile by market capitalisation in Asia.
While Asian stock markets, excluding Japan, accounted for more than 20 per cent of the value of world stock markets, they represented less than 10 per cent 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.
The announcement follows van Eyk's November small caps review that said the sector was highly competitive and performing strong.
Acorn said that launching the Asia Small Cap fund involved portfolio simulations to ensure the company could add value for local investors.
"We've used this approach successfully in Australia for the last 12 years and our research indicates we can replicate this success in Asia," Mr Loh said.
In line with results from its three years of research into the Asian small cap market, the manager aims to have the new stock offering outperform the MSCI AC ASIAN Small Cap Index over rolling five-year periods.
The fund is open to new applications with a minimum initial investment of $5,000.
Earlier this month, client demand led to Contango developing its MidCap Income Limited to provide reliable income streams and incoming planning for clients.
The offering has already registered strong client interest on the back of adviser demand for securities.
