The opportunity

The world’s largest source of micro cap stocks is in the US. Over a full market cycle, a well-diversified portfolio of high quality US micro cap companies run by top calibre management teams should significantly outperform larger cap portfolios. The companies targeted by the THB US Micro Cap Fund typically range in size from $250m to $750m in market capitalisation, and tend to grow faster and have more rapid earnings growth. Due to the market’s inefficiency – 45% of the US micro cap universe have no public earnings estimates – there is also potential for outsized returns. More than 50% of all US merger and acquisition activity is typically in micro cap companies and balance sheets are the healthiest in 20 years.

About the manager

THB Asset Management (THB), an investment franchise of Victory Capital Management Inc., is a dedicated micro and small cap specialist investment franchise based in Connecticut, USA. Founded in 1982, THB has 39 years’ experience investing in US micro cap stocks and has one of the longest and most distinguished track records in US and international (ex- USA) micro cap markets.

THB is a signatory of the UNPRI and the Montréal Carbon Pledge, and a Registered Investment Advisor with the US Securities and Exchange Commission2.

About the strategy

THB thinks and acts like a business owner. It seeks to invest alongside ‘owner entrepreneurs’, pursuing experienced management teams with a proven track record and a material level of outstanding shares. THB’s US Micro Cap investment strategy focuses on easy to understand businesses with strong balance sheets, little debt, high tangible asset ratios and stable profitability. It focuses on companies where the market has undervalued their potential, and there is a catalyst for change. THB US Micro Cap typically holds ~80 -110 stocks, with a bias towards the smallest part of the micro cap universe and stocks that have historically displayed less volatility.

1. Returns in AUD as at 31 March 2024 on a net, pre-tax basis and assume the reinvestment of distributions. Past performance is not an indicator of future performance. Fund inception date was 5 September 2014 however inception performance is calculated from 1 October 2014. Return to the reference

2. Victory Capital Management Inc. (Victory) holds an AFSL (528472) in respect of the financial services it provides to Wholesale Clients and is not licensed to provide financial services to retail clients in Australia. Victory is regulated by the Securities and Exchange Commission of the United States of America (US) under US laws, which differ from Australian laws. Return to the reference