Speaker 0:
Alan, lay out for me. Could you describe the fund's investment philosophy?

Speaker 1:
So there are four key elements of our investment philosophy. Um, we focus on high quality companies, companies with earnings momentum. Uh, valuation is important, and we are macro aware.

Speaker 1:
So if I go through each of those, uh, in turn So, um, the reason we believe you should focus on high quality companies is that in our experience in small cap, these, uh, are lower risk, and they deliver higher returns. There are a lot of low quality companies in small cap that, uh are very risky, very volatile and frankly, deliver no return.

Speaker 1:
Um, and we think the market inefficiency here that we're trying to exploit is, uh the market's investment horizon is relatively short, and therefore it tends to undervalue high quality companies where earnings potential for these companies is greater in the future. Whereas the market is more focused on the short term. And it tends to overvalue low quality companies that, um, where they valuing the current earnings. But future earnings will will likely disappoint. Um,

Speaker 1:
the second point is we focus on earnings momentum. So companies that are delivering positive, uh, earning surprise. They're beating the market's expectation. And that really is the evidence for us coming through that this is a high quality company.

Speaker 1:
Um, valuation is important. The price you pay for your investment determines your ultimate return. Um, um, any part of the market can get overvalued, and it's important that we understand what's being priced in by the market. Um, and compare that to the earnings potential we see for for that investment for that company and then finally on on the macro,

Speaker 1:
um, the macro economy, um, has a plays a big part in in, uh, share price performance. Um and, uh, understanding the direction of the macro economy,

Speaker 1:
uh, will dictate which style, factors, sectors and ultimately, which stocks will out, perform and underperform over the sort of the short and medium term. So we spend a lot of time understanding where we are in the macroeconomic cycle to make sure we're holding the right kind of companies

Speaker 0:
an image. And with all that in mind, how do you approach selecting these companies?

Speaker 0:
Well, the global smaller companies universe is a pretty substantial one. There's actually about 9000 companies within our potential market cap range. and the volume of companies presents an opportunity but also a challenge. So our approach is to have a process based on a combination of quantitative screening and company analysis. And the purpose of our process is to guide us towards these high quality companies with positive earnings momentum.

Speaker 0:
So the start of our process is that quantitative screening and the key for us is our proprietary company scoring model, where we score companies based on a variety of factors factors that we think will lead to share price out performance in the future. And this allows us to then focus our efforts on those high scorers and philtre out companies that we think are not going to outperform in the future

Speaker 0:
and then with a smaller number of companies, we then perform further rounds of quantitative screening and within that even smaller number, we then go and do the company analysis on the stocks, and we determine whether we think the stock is a potential investment. Then, with these potential investments, we're constructing a portfolio of around 40 to 60 names, so we're ending up with a high conviction portfolio with a high active share.

Speaker 0:
So, Alan, what should investors consider investing small caps. Now,

Speaker 1:
Um, the main reason for investing in small cap is the potential for for higher returns. Historically, smaller companies have delivered, uh, superior returns to to large caps.

Speaker 1:
Um, and we think we're reaching a point in the cycle now. A cycle low, uh, where historically, uh, small caps do very well. Um, another reason would be it. It helps to diversify your portfolio. Um,

Speaker 1:
uh, small caps are actually a large part of the market. They're about two thirds of the publicly listed companies in the stock market. Uh, only about 15% of market cap, but But, um, the majority of the number of stocks and these stocks usually don't appear in the the main equity indices that, uh, investors have exposure to. So, um, we we all know the saying don't have all your eggs in one basket. And, uh, uh, small caps, uh, help you to to diversify portfolio.

Speaker 1:
Maybe the the third and final point would be, uh, this is also a less efficient, less well researched part of the market where active management can add value. It can help to to generate alpha and boost those returns

Speaker 0:
and when you're looking for that small cap exposure. Surely a global pool of companies in which deficient is is the one you

Speaker 1:
want. Yeah, I I I I think so. Um,

Speaker 1:
a global fund, a global small cap fund versus a regional fund, uh, tends to be lower risk because it's diversifying that risk across many countries. Uh, several regions. Um, so if you if you look at the the the volatility, um, the,

Speaker 1:
um the the risk of a global small cap fund versus regional small cap funds it it tends to be lower risk. It actually tends to be lower risk than many single country or or single region large cap funds as well. Um, and I think with with a global approach, you also have the flexibility. We, as the fund managers, have flexibility to invest in in, uh, any sector, any country, any theme around the world. And we're not constrained,

Speaker 1:
um, in a in a particular in a particular part of the world where, um where which may be underperforming or where that where a particular theme isn't working so often the themes tend to be specific to particular particular locations and with the global fund you, you have a go anywhere

Speaker 0:
approach. And, Alan, I'll get your thoughts on this in a second.

Speaker 0:
From your perspective, what makes this fund different from the other global smaller companies? Funds? One of the reasons that Alan and I joined Premier Marin in the first place was we wanted to build the best investment process in the global, smaller company space based on our experience of what works and at premier might in the fund, managers are given free rein to, um to enable whatever

Speaker 0:
as they like. Another differentiator is actually we have a strong internal small cap resource at Premier My and there's lots of other managers who either run small cap funds specifically or small cap biassed funds, and that enables us to get an insight of smaller companies and what's happening across the globe within the different regions.

Speaker 0:
Another differentiator is that we're an experience management team. I mean, Alan has over 10 years of experience working specifically in the global smaller company space and and I've been working with him for about five years now, and we've been able to build a rigorous, repeatable process investment process based on those years of experience that that we think can drive strong performance going forward.

Speaker 0:
And Alan, we heard from Imogen about what makes the fund different compared to your peers. But from your perspective, what makes it different to other global small cup funds?

Speaker 1:
So from an investment approach, uh, perspective, I think our focus on earnings momentum valuation and the macro means that we're We're always, uh, investing in companies that are seeing positive earning surprise that are undervalued,

Speaker 1:
um, and have a positive tail wind from from the macro cycle in terms of factor and sector trends. Um, so it it means we're not constrained by a particular by by a single factor style like growth only, or value only funds would be we have greater flexibility to to move to what's working to to look at our global universe of small companies and invest in those seeing

Speaker 1:
See, see those characteristics of positive earnings momentum, undervaluation and and a positive macro tail. And

Speaker 1:
and just just one more point I would make is that, um, given this is a, uh, a smaller fund. Um, we we're we're more nimble than many of our larger competitors that we we don't have any capacity or liquidity constraints that enables us to invest in some of the smaller small cap companies. And and we're able to take action very quickly. When? When we see an opportunity.

Speaker 0:
Fantastic. Alan. Imogen. Thanks very much for coming by. Thank you.