Grandeur Peak Global Contrarian Fund (GPGCX) launched on Tuesday, September 17, 2019. It is Grandeur Peak’s first fund launch since 2015. Like the other core Grandeur Peak funds, Global Contrarian is capacity-constrained and will, in all likelihood, be closed to new investors in relatively short order. The exact strategy capacity, the Grandeur Peaks folks tell us, is hard to pin down because it’s affected by the liquidity of the names in the portfolio and the demands from some of the other GP funds whose portfolio overlaps it. Certainly more than $100 million, likely well under $300 million.
Of the seven extant Grandeur Peak funds, Global Stalwarts (GGSOX) and International Stalwarts (GISOX) remain open to all investors, Global Micro Cap (GPMCX) is closed to new investors and the remaining funds are closed to new investors through intermediaries but open to investors who invest directly through Grandeur Peak.
Grandeur Peak is a premier global micro- to small-cap investor with a bent toward quality and growth. Their portfolios typically hold between 100 – 300 stocks. Global Contrarian will be distinctive because it will be more value-oriented and, conceivably, more concentrated. Their description is “take larger and broader positions in out-of-favor and undervalued companies, sectors, and geographies.” In general, managers running growth-oriented portfolios track these stocks, but tend to avoid them because they don’t fit their mandates.
The portfolio will target firms that fall into one of five categories:
- Core Contrarian: High quality companies in an out-of-favor industry or geography.
- Fallen Angels: Quality growth companies that we believe have hit a temporary “bump in the road.”
- Undiscovered Growth: High-quality companies that are growing, with nice headroom, but are not yet broadly discovered.
- Under the Radar: Quality companies with underappreciated growth opportunities.
- High Yield or Sum of Parts: Strong income producer with lower earnings growth; undervalued when aggregating total assets.
The firm’s CIO, Randy Pearce, argues that the sorts of stocks in the Contrarian portfolio have the potential to be substantially mispriced because neither growth managers nor index funds are able to invest in them: “The general market shift towards passive investing [means] there are plenty of good small/micro-cap companies that aren’t captured by passive products and are trading at even more appealing valuations. We’ve waited eight years to launch this fund. The timing feels right both for our team and the market opportunity.”
All of the other Grandeur Peak funds, with the exception of Global Microcap (GPMCX), have outperformed their peer groups by 210 – 420 bps annually since inception. The Grandeur Peak funds performed brilliantly in their first several years, and the GP folks agree that recent performance has been “fine but nothing break through.” Eric Huefner, GP’s president, points to a couple factors that have been impeding the funds’ short-term performance:
We haven’t been in a great market for our quality focused style. We’ve always talked about seeking to keep up in bull markets and outperform in a bear markets…well a 10-yr bull market hasn’t given us the best opportunity in which to shine, so we feel good about staying ahead of the benchmarks. We have also been swimming against a significant Emerging Markets headwind in our portfolios the last few years; we over-weighted EM because we think there are better long-term values there and we’re not going to try to make macro or market calls.
Since GPMCX is so distinctive – it closed on the first day of operation, has the second-lowest average market cap of any global fund, and its sector weightings often vary from its peers by 2:1 or 3:1 – the fact that it trails its Morningstar peer group is not particularly telling.
The portfolio managers for the Global Contrarian Fund will be Mark Madsen and Keefer Babbitt, with Robert Gardiner as the Guardian Portfolio Manager. Both managers are also on the Global Reach Fund (GPROX) team, and Mr. Madsen co-manages the International Opportunities Fund (GPIOX).
While designated an “institutional” fund, the minimum initial investment is $2,000. The minimum for a college savings account is $100. The Fund is, of course, available directly from Grandeur Peak and should be available through most of its existing channels (Schwab, TD Ameritrade, Pershing, Fidelity, etc.) though it sometimes takes a few days/weeks before a new fund is active on every platform. The Grandeur Peak website has additional details.