Balmoral Investors founders Tim Canham and Wik Farwerck to launch microcap fund
Microcap specialists Tim Canham and Wik Farwerck are days away from launching a new fund that counts star stockpicker David Paradice as an early investor.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
Passive strategies have long run rings around active equity managers but one segment of the market is yet to be saturated by the ever-popular index-tracking funds.
It is this pocket where veteran fund managers Tim Canham and Wik Farwerck have a track record of outperformance and are hoping to repeat their success, a year after their last strategy was dumped by First Sentier.
Months after walking away from First Sentier, the duo set up boutique firm Balmoral Investors in August 2024. They’re now a week away from launching their new microcap fund.
“The microcap space has not been polluted by ETFs and passive money. That’s why we started in this segment; we just think being an active manager in large caps is a waste of time,” Mr Canham said.
“And it’s a good time to launch; volatility is good.
“Microcaps have done nothing in the last 12 months, the small ords index is basically flat. So there’s opportunities out there.”
The Trump effect has hit the big end of town hard, but small cap fund managers can’t ignore the threats and erratic decision-making coming from the US administration.
“We’re not a macro manager, but we’ve got to be aware of those issues,” Mr Canham said.
“(Tariffs) are obviously most poignant for retail, because they’re going to affect the cost of production. If you’ve outsourced your whole business model to manufacture in Vietnam, you might have a problem. So we’re a bit more cautious on those sorts of stocks at the moment.”
While the bigger end of the market gets all the attention – and suffers the volatility that comes with the weight of passive money – microcap stocks with market value of less than $750m are where Canham and Farwerck like to play. They’re looking to hold around 25 stocks in their portfolio once up and running, and gradually expand from there.
“A lot of these businesses we’re looking at, they’re very domestic-focused, they’re small,” Mr Canham said.
“They might be in property, or small industrial businesses that have a domestic-market focus.”
On their target list as potentials for first purchases are domestic gas play Amplitude Energy, West Australian-based property developer Cedar Woods and retailer Cash Converters.
“Cash Converters is a bit different but it’s on a pretty strong yield and it’s got good young management,” Mr Canham said. “We like stocks that are not just left behind, but also under-researched.”
The duo are not starting the fund completely from scratch. When they left First Sentier following the closure of their $500m developing companies fund, they took with them their IP and a reputation for beating the index.
Their consistent outperformance delivered average annual returns of 14.5 per cent for the 15 years to March 2024, well more than double the benchmark’s 6.2 per cent.
The support of star stockpicker David Paradice doesn’t hurt either. He’s among the initial investors in the new microcap fund that have tipped in millions of dollars ahead of a May 1 launch.
Others to add to the pot include wealthier families that have listed companies and other high net worth individuals, according to Mr Canham who declined to provide any other names.
They expect to have $15m ready to deploy by the launch date, with a target of $50m to $75m by the end of the year. The minimum initial investment is $100,000 but “that’s not a hard and fast rule for friends and family”, Mr Canham noted.
Within the microcap world, a market cap of $400m to $750m is the sweet spot for the seasoned stockpickers.
The dream is to find a minnow and ride the earnings wave until it gets big enough to hit the mid-cap index and get picked up by the passive funds.
More Coverage
Originally published as Balmoral Investors founders Tim Canham and Wik Farwerck to launch microcap fund
Gold just fired warning shot and it means big things for Aussie stocks
A quiet but powerful market signal just flipped - one that’s only appeared three times in the past 100 years. And it could mean a major change in direction for Aussie stocks, writes ASX Trader.
PAX makes push for foothold in local payments market
Chinese payments giant PAX is preparing to push into the Australian market after taking over its local agent, aiming to woo big clients with a security-focused pitch.