Having a private investigator’s licence is a definite advantage in the competitive world of small-caps funds management. PHILIPPA YELLAND talks with the man behind the magnifying glass.

It is elementary, dear reader, that Drew Wilson will sleuth out the best way to investigate small companies which are potential investments. “It occurred to me that there was more to doing background checks than just Googling,” says the affable Canadian. “So I Googled for a course on how to do it in a systematic way.” And he found it: a Certificate III course run by the Australian School of Security & Investigations, leading to a Commercial and Private Inquiry Agents Licence. For Wilson PI, none of this is rocket science. “It’s a competitive advantage,” he confides. “It’s part of fundamental analysis. In formalising it, it gets done. And, if it’s not done, then it’s my failure.” As managing director at Atom Funds Management, he shares responsibility for the boutique’s $62 million in client money with CIO David Shearwood and portfolio manager George Raftopulos.

But if Wilson aspired to a full private investigator’s licence, he would have to work as a supervised subcontractor for an investigator with a master’s licence. That isn’t too appealing. He’d rather apply his new skills to the less-researched realm of the equity market. These skills have benefitted Wilson’s corporate fact-finding missions, and therefore Atom, he says. “We were looking at investing in a company which had passed our initial screening. Sometimes the alarm bells don’t go off. But, I found out that the company hadn’t shipped as many units as it claimed to have, and we called off the deal.” But it’s not all cloaks and daggers, or posing with Holmesesque calabash pipes. Atom’s research model is an interesting one.

When Wilson and Shearwood were setting up the fund in early 2006, they faced huge costs in employing analysts in Australia. “Before we even had any clients, we had 1,600 Australian companies to look at and we thought: ‘How can we do this – even a junior analyst costs $100,000 a year in Australia?’” Wilson remembers. So they applied the thesis of Thomas L Friedman’s book, The World Is Flat, and journeyed to India in early 2006. There, Wilson and Shearwood met well-educated analysts who were willing to work for a quarter of the cost of their Western counterparts, and so Atom’s subsidiary was opened in July in Bangalore, the country’s Silicon Valley. But this was not the US model of “data monkeys” merely inputting data, Wilson says. Atom bought data in Australia, stored it in Sydney and then had their Indian subsidiary staff run the information through pre-populated screens and then tested against human intelligence. The results would be analysed, assumptions changed, and screens run across the conclusions. Then – enter stage right – Wilson PI appears.

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