Microcap play shows we can go where megafunds can’t: BUSS(Q)

The chief executive of the $1.5 billion BUSS(Q), David O’Sullivan, said a $10 million allocation to Contango Asset Management’s microcap fund was an example of how small-to-medium funds could access opportunities the “;megafunds”; could not.

Contango began marketing the microcap fund to institutions last year, once it began approaching a three year track record after an ASX-listed version debuted in March 2004. Contango client services director, Carol Austin, said the wholesale allocation would be soft-closed at $60-70 million to preserve performance which is tracking around 60 per cent annualised since inception. “;The funds we’ve been talking to haven’t been the biggest – it’s almost like this is a boutique product for a boutique fund,”; she said. The microcap LIC is currently capitalised at $150 million, and Contango aims to keep overall FUM in the strategy to below 0.5 per cent of the microcap universe. That means the current cap is $350 million, based on a Contango-defined $6-7 billion microcap universe of companies capitalised at $250 million or below – which includes a few companies in the lower echelons of the ASX 300. BUSS(Q)’s O’Sullivan said the Queensland-based public offer fund was small enough to access the Contango product, and for it to make a material difference to members’ returns. “;Something this size is immaterial to an AustralianSuper, but it’s a sector of the market where we are seeing more value-add from managers than in the large cap space,”; he said. “;This is an example of where the scale benefits of going from $10 billion to $20 billion can be really overrated,”; O’Sullivan added. BUSS(Q) also recently joined the funds which have fired Lloyd George Asset Management in the wake of three senior staff departures. The replacement manager for the $35 million emerging markets mandate was Lazard Asset Management.