For Big Global Returns, Get Small

The birth of a new mutual fund can be a very welcome event. This is especially true when the new arrival comes from a talented family. Well, behold — Grandeur Peak Global Reach Fund (GPROX) has all the promise of a bright future. This new fund launched June 19 and is from a fund family with proven skills when it comes to small-cap investing on a global scale.

Managers Robert Gardner and Blake Walker founded their firm after several successful years picking stocks for Wasatch. They started their firm specifically to capitalize on the opportunities that exist in small- and micro-cap stocks throughout the world. This new fund will be what they describe as their “flagship portfolio” and will feature 300 to 500 of their best equity ideas globally. GPROX offers a more diversified portfolio than the recently closed Grandeur Peak Global Opportunities Fund (GPGOX), which features just over 200 stocks.

Since GPROX is just a newborn, it may be helpful for us to take a look at his older sibling GPGOX to gain some insight into how this youngster may turn out.

Big brother GPGOX has $407 million in assets and a turnover ratio of 35%. An expense ratio of 1.75% appears a bit on the high side, but it’s reasonable for this type of fund and the skills of the management team. The fund is up 34% over the past year, placing it in the top 3% of its category according to Morningstar. In terms of sector weighting, the fund has the bulk of its assets in the industrial and technology areas.

The managers chose to protect existing shareholders by closing the fund about 18 months after it launched. Limiting the assets of the fund means the team can keep the portfolio focused squarely on smaller companies.

I anticipate funds from the Grandeur Peak family to be riskier than the overall market given the nature of the stocks in which they specialize. For this reason, I would favor the new issue GPROX for the more speculative part of your portfolio. If the firm is true to form, the opportunity to be part of this promising newborn’s future will be limited.

Smart investors realize that exciting opportunities exist in other parts of the world. The right active management is crucial when it comes to sorting out where the best opportunities exist, and which names are the most compelling investments. Grandeur Peak Global Reach Fund (GPROX) appears ready to embark on a course for a successful future.

As of this writing, Bill Wysor owns GPGOX.

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