Full-up at home, Paradice goes global
With all its existing funds soft-closed, Paradice Investment Management has set up an office in Denver, Colorado staffed by three analysts formerly of Artisan Partners, to launch a global small-mid cap capability which has already found seeding of $200 million from an existing Australian client.
It is understood the seeder is the $16 billion REST Super, a supporter of Paradice IM since its establishment in 1999. The reputed $200 million will be through a mandate structure, expected to be live by the end of February. It would represent the bulk of the US$300 million initial cap for the capability, which will be offered to Australia-based investors only at this stage.
The portfolio manager of Paradice IM's global small-mid cap product will be Kevin Beck, who spent three years on Artisan's International Value Fund (which won the shop Morningstar's International Fund Manager of the Year prize in 2008) prior to six years as a senior analyst at Denver Investment Advisors, where he first met Paradice IM founder, David Paradice.
"It was round the time I set up the boutique and I wanted to travel to the US and talk to people about small cap stocks. Kevin returned my calls, and we've been in touch ever since," Paradice said.
Beck and the two fellow Artisan International Value Fund analysts who'll join him as Paradice employees, Anand Vasagiri and Jane Danziger, shared Paradice IM's value-seeking and contrarian approach, Paradice added.
"Our Australian clients have found it really hard to find a good global small cap manager, so they've encouraged us to set one up ourselves. We spoke to Kevin about doing this three years ago, but we all ended up deciding small caps were too expensive at the time," Paradice said.
An attraction of the move for Beck was that the Paradice IM branch office would be based in Denver, where he lived for many years prior to a shift to San Francisco with Artisan.
"Denver has a really vibrant funds management community, you've got Marsico here, Janus are two blocks from the Paradice office, so you get a good flow of company executives coming through. It's in a great time zone because you get the close of Europe and the open of Asia, plus it's a direct hub for United Airlines so it's easy to get to Europe. And the fact it's my wife's home town doesn't hurt," Beck said.
The Paradice global small-mid cap capability will initally be capped at US$300 million, a fraction of what Beck's Artisan fund was managing, allowing him to drill deeper for value in the sector.
"When you get a big macro dislocation, small caps tend to get thrown out with the bathwater...as contrarian investors we're trying to buy assets at 60 cents on the dollar, which is easier said than done, but we are finding a lot of fantastic, nichey little franchise businesses out there at the moment, with great management, assymetric risk through having little financial leverage, and attractive valuations," Beck said.
Each member of the US team will spend two weeks in Denver followed by two weeks travelling, with Beck singling out Japanese and US mid-small caps as currently being cheap, and even mentioning there were a couple of good Greek companies being unfairly punished by that country's macroeconomic travails. The portfolio will hold 50 to 70 stocks at any one time, a level of concentration which Paradice agreed fit the 'absolute return' tag.
Paradice said his Australian employees would benefit from the information crossover with the Denver team, as well as the opportunity it gave them to spend time working in the US.
