The senior members of the Australian small-caps team within Queensland Investment Corporation (QIC) have exited the $70 billion manager to form a boutique.

Portfolio manager Michael Dee and senior investment analyst Paul Xavier will leave the manager next month to open a small-cap boutique in Brisbane. Andrew Hodge, an investment analyst and the remaining team member, will exit QIC but won’t join Dee and Xavier’s new venture. “Michael and Paul are pursuing the boutique route…it’s an amicable departure,” Simon Hudson, head of Australian equities at QIC, said. “Where they’re going, they have some seed capital.” Dee has been with QIC for 13 years and led the small-caps team for eight. Xavier worked alongside Dee for most of this time, while Hodge spent four years with QIC and 18 months in the small-cap team. Hudson will manage the small-caps portfolio while QIC seeks a portfolio manager and an analyst to replace the team. The manager will not sub-contract any small-caps mandates it runs to Dee and Xavier’s boutique, Hudson said. “We’re not expecting to lose any mandates.” Hudson has experience in managing small-caps portfolios, having cut his teeth in portfolio management by implementing the investment process of the Colonial First State core wholesale small companies fund. As he takes on this new responsibility, the remaining Australian equities investment analysts at QIC will absorb small companies into their research. “;In this sort of situation you expect that a firm like QIC had a back-up framework in place that was robust.”; The search for a replacement portfolio manager and analyst were underway, Hudson said. A ratings agency analyst who has reviewed QIC’s small cap capability in the past said the large FUM managed by Dee’s team – about $1.5 billion – made outperformance difficult in the capacity-constrained small caps world, and could have been a factor in their departure.

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