Prime Value: Small-cap returns without ratcheting up risk

Livewire Exclusive

Livewire Markets

Shooting the lights out (as an investor) is great, but even many small-cap investors need to strike more of a balance between risk and reward. As a family office structure, Prime Value’s Emerging Opportunities Fund keeps a keen eye on capital preservation and downside protection, while investing in a basket of ex-ASX 100 stocks. “We run a relatively ‘vanilla’ fund in that we don’t use leverage, we simply buy stocks and the cash left over stays in cash,” says portfolio manager Richard Ivers.

While managing risk is key, the fund has also delivered stellar performance over one, three and five years. The Prime Value Emerging Opportunities fund beat its Small Ords benchmark by more than 11% over three years, returning more than 20% (annualised) during the period.

Ivers emphasises his team’s GARP (growth at a reasonable price) approach, which generally targets Australian and New Zealand-listed companies under $4 billion in size. And again, while past performance isn’t a guarantee of future returns, the strategy’s risk-level (volatility) was also around 14% lower than the Small Ords.

Some of the larger positions in the fund are Newscorp (ASX: NWS), which alongside its well-known media businesses include real estate listing firm REA Group (ASX: REA) – the name behind New Zealand-listed logistics company Mainfreight is another core holding of the fund. Both companies are benefiting from the vaccine-led reopening, which has seen the local property sector flourish and demand for parcel deliveries continue pushing higher.

More recent additions to the portfolio include United Malt Group (ASX: UMG) and private health insurer NIB Health (ASX: NIB). While the first of these was hit hard during the pandemic as pubs and restaurants closed, demand is now “expected to rebound as vaccines are rolled out,” says Ivers.

“Even beyond the COVID recovery, it’s a business that can grow at 10% a year compounded, which makes it a very attractive position for us.”

NIB performed well through the pandemic, when membership levels held up and benefited from large numbers of surgery deferrals. Its membership levels have also stayed strong, as health remains a priority for Australians, who are also attracted by the tax-effectiveness of private health insurance.

The Prime Value Emerging Opportunities Fund is open to retail investors and can be accessed via:

Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

1 topic

4 stocks mentioned

1 contributor mentioned

Livewire Exclusive
Livewire Markets

Livewire Exclusive brings you exclusive content from a wide range of leading fund managers and investment professionals.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment