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Whitman Asset Management launches fund to tap into UK small cap opportunities

News Team, 27/11/2020

Whitman Asset Management has announced the launch of a new fund, the TB Whitman UK Small Cap Growth Fund. It is said to be the first offering from the firm’s fund management division and is seeking to tap into an opportunity set recently highlighted by Schroders head of equities Rory Bateman, who wrote an exclusive piece on UK small cap stocks here.

The offer period closes on 8 December and the fund has already received firm commitments from investors to the value of £15 million. Whitman is targeting £25 million in the initial stages of the fund and although looking to hit £100 million, this target does not have to be raised immediately.

The fund, structured as an OEIC, has an objective to seek long-term capital appreciation from investment in a fairly high conviction portfolio of between 30-50 growth stocks within the extensive smaller companies universe, typically with market capitalisations under £1.6 billion.

The predominant focus is on bottom-up fundamental individual company analysis and selection. Four core qualities will be sought by the managers in the investment selection process. These are: exceptional management team with meaningful equity ownership, strong and sustainable competitive advantage, predictable and strong cash generation and what the firm calls a ‘virtuous cycle’ of re-investing self-generated cash at a high level of return.

The team managing the fund will be led by Whitman’s CIO, Christopher Pease, a veteran small cap manager previously at Sarasin & Partners and legacy Henderson Investors. Joshua Northrop, previously at small cap specialist Hargreave Hale, will be co-manager on the fund.

Araminta Le Flufy, Whitman’s CEO, said in a statement: “We are very excited by the early interest already shown by investors in the new Fund. The combination of Christopher’s track-record, small initial size of the fund and the established team at Whitman is a powerful combination. We believe the timing for this launch is right, with the current valuations of UK smaller companies attractive on a historic basis within an asset class where alpha is easier to find.”

Christopher Pease, CIO of Whitman, added: “The long-term case for investing in smaller companies is stronger than ever. We have identified a lot of extremely well-run and quality businesses. Our private client small cap portfolios have continued to perform well during the Covid crisis: indeed, the crisis has helped throw into sharp relief just how fleet of foot smaller businesses can gain the edge over their larger company competitors.”

Of course there can be problems with small cap funds with issues such as capacity but with a small cap specialist at the helm these should be well managed. The first dealings in the fund will commence on 9 December 2020 at 12pm.

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