Investment Strategies > US Small Cap

US Small Cap

A research-intensive strategy with a long-term perspective seeking to identify high-quality, attractively-valued companies with stable, modest growth prospects

Quality focus seeks to mitigate common risks associated with small-cap investing
Patient, long-term investors with low turnover investing style
Adhere to a quality approach in all market environments, even during periods where lower quality companies outperform
Has historically provided downside risk mitigation in declining markets, while lagging in strong, rising markets
Experienced team of nine dedicated, small-cap professionals led by Co-Portfolio Managers Judith Vale and Robert D'Alelio, who have over 30 years of industry experience

Available as a UCITS Fund

Robert W. D'Alelio

Portfolio Manager

Brett Reiner

Portfolio Manager

Gregory G. Spiegel

Portfolio Manager

Key Risks

Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Smaller Companies Risk: In respect of portfolios which may invest in small capitalisation companies, such investments involve greater risk than is customarily associated with larger, more established companies due to the greater business risks of small size, limited markets and financial resources, narrow product lines and a frequent lack of depth of management.
Counterparty Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investments in a currency other than the base currency of the portfolio are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment. If the currency of the portfolio is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance may increase or decrease if converted into your local currency.

Overview

Investment Philosophy

We look for growing, financially strong small-cap companies that are often mispriced due to a lack of analyst research coverage, coupled with investors' obsession with short-term time horizons. As disciplined, experienced small-cap investors, we believe that Wall Street's tendency to focus on short-term earnings trends presents opportunities to identify and invest in high-quality, growing businesses at attractive prices.

We seek to build a diversified portfolio of companies with the following characteristics:

Strong balance sheets
High returns on assets, protected by competitive barriers to entry
Excess cash flow generation, which can self-fund growth
Above-average growth with below-average volatility
Valuations at or below the small-cap market (Russell 2000 Index)

We tend to avoid:

Pure commodity businesses
Highly volatile businesses
Short cycle businesses (either economic or product)
Start-up businesses (short operating histories)

Investment Process

Our bottom-up investment process primarily focuses on identifying quality businesses in which we would like to invest, typically over a three- to five-year time horizon. We concentrate our efforts on "big fish in small ponds" — companies that dominate niche markets and have the potential to extend their franchises into related businesses.

Financial and Fundamental Analysis

We employ rigorous financial and fundamental analysis to determine whether or not profit and loss statements (P&L) have been manipulated; if cash flows are deteriorating; or growth is slowing.

Top-Down Viewpoint

In addition to our bottom-up approach, we also overlay a top-down viewpoint that guides portfolio positioning. We are not averse to overweighting particular market sectors for extended periods if we determine that a secular demand trend is firmly in place.

In-Depth Research

We seek to identify sustainable quality with a focus on:

Strong free cash flow generation which can make firms less capital market dependent
Superior return on assets supported by competitive barriers to entry
Less volatility and less economic sensitivity with generally strong balance sheets
Consistent, above-average growth rates, sustainable over the intermediate and long term