The days when Australia “rode on the sheep’s back” may be long gone, but agriculture remains a critical component of the economy, generating valuable export income. While overseas investors understand its importance, for most local institutions it’s still a bridge too far.
For several years, investors, from institutional to retail, couldn’t get enough of the tech stocks with all their promises of future growth. But now the market has spoken and it’s saying precisely this – valuations matter again.
Investors Mutual LIC targeting smaller stocks
(Pictured: Anton Tagliaferro)
With many small-cap funds either at, or near, capacity, Investors Mutual has decided to enter the listed investment company market with an Australian equities fund which invests outside the top 20.
The LIC – QV Equities Ltd – seeks to raise a minimum of $100 million and maximum of $200 million and hopes to provide a complementary strategy for investors who are increasingly going directly to the market for their exposures to shares.
The prospectus points out that the top 20 stocks account for 67 per cent of the market capitalisation of the ASX 300. More than 50 per cent of the top 20 are accounted for by financials (ex property) and 16 per cent by resources.
By contrast, the ex-top 20 part of the ASX 300 holds no individual stock with more than 3 per cent of the index nor any sector with more than 28 per cent (the industrials). Financials have only 7 per cent and resources 9 per cent.
Anton Tagliaferro, the veteran value manager and founder of Investors Mutual (IML), said: “The ex 20 offers more diverse entities in terms of industry sectors, providing a far greater breadth of opportunity… QVE will aim to provide investors with a ready made portfolio of high quality stocks with established businesses and with solid growth and dividend prospects. Remaining true to IML’s tried and tested investment philosophy QVE will identify and invest in stocks which IML assesses are good value and have the quality attributes of strong competitive advantage, recurring earnings, capable management and can grow their earnings and dividends over time.”
The issue is not being underwritten but has been arranged by CBA Equities, which is also a joint-lead manager with BBY, Patterson and Taylor Collison. Co-manager is Lonsec Securities.
Investors Mutual, part of the Treasury Group stable of managers, was founded in 1998. It has about $4.7 billion under management.
