Pengana Capital expected a good take-up of its new Global Small Companies Fund by the SMSF market as it provided a new opportunity in the vast small-cap universe, which was generally overlooked.
The fund was launched at the start of April in partnership with Chicago-headquartered Lizard Investors, which will serve as the investment manager, while Pengana will provide the operational and distribution services.
The portfolio was concentrated with 30 to 80 global small and mid-cap companies and aimed to obtain returns greater than the MSCI All Country World Index SMID Cap unhedged in Australian dollars over rolling three-year periods after fees.
It had controlled capacity at US$500 million.
Pengana had now begun to inform the market about the fund and believed it would generate good traction with SMSF investors, Pengana chief executive Russel Pillemer said today.
“I would imagine so as that’s a core market of ours – our high net worth, self-directed SMSF investors,” Pillemer told selfmanagedsuper.
“Whilst global small caps are suitable for everybody, we find that SMSFs are particularly interested in it and it’s because they can really understand it.
“Australians need to diversify their allocations to global equities and with super funds, especially SMSFs, they have very little allocation to global equities, but it’s happening as we speak, so once you accept that you want to go global, the next thing you need to [ask] is whether I should allocate a portion of my global equities to global small caps.”
Pengana director of distribution Damian Crowley added it was a challenge for SMSFs to invest in global small companies directly.
“The problem is they are companies that no one really knows about, so it’s not something that they wouldn’t want to get into,” Crowley said.
“Also, I don’t think a lot of people want to be index-aware in this space because that’s not necessarily where the opportunities are.”
Lizard Investors principal Jonathan Moog said the fund looked to take on minimal risk and long-term capital preservation was critical to the fund.
“Market risk is something that you can try to hedge out and it’s a very short-term phenomenon, but to us real risk is long-term capital impairment and we try to avoid that through the quality of businesses that we invest in,” Moog said.
“The United States has a much deeper global allocation than what I understand where Australia is.
“However, the US has become a very segmented market to this point – there are emerging market managers, frontier investors, European investors, Brazil funds, et cetera.
“So there are very few funds that look like us, even in the US, that are truly opportunistic around the world, and so what you have are flows of capital in and out of regions that create huge valuation distortions caused by the way the US allocates capital, and that actually is the big opportunity for us in global small caps because we’re flexible enough to take advantage of that.”
Pengana was currently in discussions with research houses to get the fund rated.
