An international multi-affiliate manager has signalled its expansion into Australia with the purchase of a controlling interest in a Sydney-based small cap boutique.

Sanlam Investments, a South African-based firm with 15 affiliates in various countries, has bought the holdings of the non-executive shareholders of Atom Funds Management, and committed further working capital to the business. It is Sanlam’s first Australian investment, having developed footprints in the UK, Europe and Africa. The funds management business is a subsidiary of one of South Africa’s largest insurance companies, a former mutual. An important attraction for Sanlam was Atom’s Indian office, in Bangalore, where the firm has 10 investment analysts looking at Australian small-cap stocks. Sanlam currently has an Indian joint venture on the insurance side and has stated publicly that it wants to add a funds management business in that country. The co-founders of Atom, David Shearwood, the CIO, and Drew Wilson, will be joined on the new Atom board by Hendrik Pfaff, Sanlam’s Cape Town-based head of international investments. Atom will now be adding to both its Sydney-based team of analysts and that in India, according to Shearwood. The Atom small cap fund, launched last December, has about $10 million under management, with a cap set at $500 million. It currently holds about 30 stocks. Shearwood said the small cap market in Australia currently offered some “amazing opportunities” for value. Atom’s style is a mix of value and growth, currently having a slight overweight to small resources. The analysts cover about 1600 stocks, of which about 100 are knocked out by the first screen on SRI and country risk (particularly for miners with some international operations in high-risk countries). The Sydney-based managers provide the fundamental research for the portfolio: “We did 263 company visits in the first six months of this year, more than 60 per cent of which were one-on-one interviews,” Shearwood said.

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