Innovatia

MICROEQUITIES, MACRO HOPES: THE RUNDOWN ON INVESTING IN SMALL CAPS The debates over investing in small vs large cap stocks often miss central points – and can descend into absurdity. For example, it is entirely possible- and legitimate- to present aggregate figures which demonstrate that small caps have underperformed larger shares over 10 or 20 years, while select small funds deliver consistently superb results. W arren Buffett invested in small caps in his early days, and individuals with self-managed super funds are now fol-

Innovatia offers investment and market advice from Funds Managers, Stock Analysts, Real Estate specialists and leading Financial Advisors. Our philosophy on investment advice is simple: everyone should benefit from it at any level, all the time. An investment portfolio managed with care, discipline and regularity – whether that be one hour per week or per month – will yield positive results. Our point of difference is in selectivity. Here, we will present the views of a large handful of deeply experienced, professional investors who provide sensible angles of thought, and critical evaluations and investment data worthy of consideration. We kick off this growing endeavour with an interview with Carlos Gil, exploring his in-depth understanding of the small cap investment space. Potential for innovation is high, as is the risk and potential reward. Phillip Gillard, long-standing and award-winning financial planner, of Shadforth Financial weighs in with essential views on portfolio planning and building wealth.

could have decided to place capital in any kind of environment. What drew you to micro caps? Of course, there are growth opportunities within this category, but that remark has to be supplemented by a number of big IF’s. Some of these companies listed when very small- a case where acute examination of cashflow fundamentals and business plan, strategy and people is imperative. Also, we do not invest in companies without at least a two-year record of profitability…and we invest in industrials only. We know our space. You use the term Private Equity to describe your approach, can you clarify this please? It refers to a number of methods and attitudes about investing. We form a kind of private business partnership with the company invested in. We use an instrument called a unit trust which provides benefits and flexibilities. Basically, it is the mindset of taking a long-term position in a company. Can you elaborate? Yes, let me say that time is very important in

lowing suit. From our macro social outlook, we cannot resist the belief that, given a well-regu- lated financial market, the success of small cap stocks forms some kind of significant indicator of innovation, creation and economic vitality. Note, this is not a universal endorsement of in- vestment in small cap shares – each investor must examine their own risk profile. For a closer look at this level of investing, Innovatia Editor-in-Chief John Keeney turned to Carlos Gil, founder and CIO of Microequi- ties – a firm with a stirling reputation owing in part to the 16% year-on-year return from its Deep Value Fund since 2009. JK: Could you define “Microequities “? CG: Initially we used it to refer to $300m mar- ket cap and larger. We have amended this in re- cent years to $500m. As head of International Equities with a large firm previously, Banesto, one imagines you

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