When we started the Ausbil MicroCap Fund in February 2010, we missed the bottom by about 12 months but in hindsight, it was still a fantastic time to start a smaller companies fund. Valuation multiples ranged from 8-12x PE and earnings were recovering so growth looked better than it does today. Fast-forward six years and earnings multiples are now in the high teens with growth as scarce as any time in the recent past. With the cash rate under 2%, it’s not hard to argue there’s plenty of scope to pay more for assets. Despite this, when approaching a new opportunity, we tend to think valuation should be one of the final, not first, steps in the investment process. First, you have to decide whether it’s a good business, whether management is capable, honest and aligned and what the future looks like for this business. If it’s a bad business with C-grade management or has a challenging outlook, we’d rather not play regardless of price.