Stuart Widdowson has launched boutique asset manager Odyssean Capital in a joint venture with Harwood Capital.
The former manager of the Strategic Equity Capital trust left GVQ Investment Management in February 2017 and signalled his intention at the time to start a small-cap focused investment business in partnership with Harwood.
The investment strategy at newly-launched Odyssean Capital will seek to capitalise on the pricing anomalies and engagement opportunities in UK smaller companies and will only offer closed-ended products.
He said: "In our view, closed-ended funds or locked up capital is essential to invest with conviction in less liquid smaller companies over the long term.
"The problem with managing less liquid assets through the Oeic [open-ended investment company] structure is demonstrated by the challenging times that the Oeic property funds experienced post Brexit."
A press release seen by FTAdviser stated: “Odyssean will combine long-term public and private equity investing expertise to launch a highly focused, unconstrained, long-only strategy investing in quoted UK smaller companies.”
Mr Widdowson said: “We believe the introduction of Mifid II legislation will lead to many more opportunities to find mis-priced UK smaller quoted companies over the next few years, so timing could not be better to launch our investment strategy.
"Smaller companies have significantly outperformed their larger counterparts over the long term but generally remain under-researched, undervalued and often overlooked.”
Asked when his first investment trust launch at Odyseean Capital was planned, Mr Widdowson said: “We have had expressions of interest from both our business and personal networks and are considering launching a limited capacity product to cater to these needs.
“We would like to be able to offer something for sophisticated long-term retail investors.”
Odyssean Capital plans to cap its strategy.
Mr Widdowson said: “We intend to raise up to £500m progressively over several years from like-minded, committed investors. The quality and alignment of that investor base is far more important to us than how quickly we raise the capital.
“We follow a niche strategy which is not infinitely scalable – and premium long-term returns can only be sustained by capping capacity.”
Those hired to join Mr Widdowson at Odyssean include Ed Wielechowski, a former principal in the technology investment team at HgCapital, who will be on the fund management team at the new firm.
As has previously been reported, former Hg Capital chief executive Ian Armitage has been named non-executive chairman at Odyssean.
Kate Reid, formerly at Algebris Investments, has been appointed to oversee investor relations.
Dennis Hall, chartered financial planner at Yellowtail Financial Planning, said he believed there was room for another investment trust entrant in the UK small-cap space.
He said: "If you consider the number of small-cap companies compared to the number of mid- and large-cap companies listed on the stock exchange, and then compare the number of investment trusts covering each of those sectors, you could argue quite convincingly there is room for more players.
"The further down the size ladder you go, the greater potential for a skilled manager to find real pockets of value compared to large-cap stocks. There are far fewer closed-ended funds across all sectors compared to open-ended funds."
During his more than seven-year tenure as lead manager of GVQ's Strategic Equity Trust, Mr Widdowson delivered a strong performance for investors.
By the time he left in February last year, the investment trust had returned 174 per cent over the past five years.
eleanor.duncan@ft.com
