02.21.2012

No Locals, No ADRs, Just Expertise

02.21.2012
Terry Flanagan

Buy-side firm that trade internationals doesn’t need ADRs, or local brokers.

Utah-based portfolio managers, Robert Gardiner and Blake Walker built an all-encompassing mutual fund brand at Wasatch Advisors. Last October, the two took their investment expertise and launched Grandeur Peak Global Advisors, manager of the Grandeur Peak Funds—a pair of 40 Act mutual funds that focuses on international “micro-cap” opportunities—under-discovered, under-owned companies that have remained under the radar for most investors.

The fund family, which includes the Grandeur Peak Global Opportunities Fund and the Grandeur Peak International Opportunities Fund, has recently reached $100 million assets under management, and itself to thank for getting through the foreign market access difficulties.

“Our funds are registered to purchase stocks on more than 30 foreign markets and very few of our companies can be accessed via ADRs (American depository receipts),” said the firm’s president, Eric Huefner.
“We typically buy our stocks directly through foreign markets. We do all of our own research, so our team is constantly traveling the globe. We don’t depend on local knowledge, except that we do use local brokers to set up appointments with companies that we have hand-picked.”

For Huefner, maintaining a global perspective is critical, and the surest way of attaining that is being on the ground.
“We believe a global perspective is the most critical element in evaluating companies no matter where they are based, so all of our analysts are global analysts,” he said.

The global perspective emanates into a jet-setting schedule for most of the firm.

“It takes a disciplined screening process and a tremendous personal travel commitment to sift through the 30,000+ companies that are in our consideration set globally,” cited Grandeur Peak’s Chief Investment Officer Blake Walker.

While finding boutique opportunities may have its rewards from a returns perspective, trading can’t be easy with small, illiquid names.
“We desire to be a great boutique firm but liquidity is certainly relevant in this space,” Huefner acknowledged. “One of our great advantages right now is that we are small and nimble with a team of experienced small and micro cap investors. We’ll limit assets when necessary to protect our investment strategy.”

Huefner told Markets Media that Grandeur Peak’s largest asset will remain Gardiner and Walker in regards to navigating illiquid waters.
“Robert and Blake have been investing in small/micro caps for decades so they are very skilled in knowing how to best trade less liquid securities within our long-term investment approach,” he said.

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