Investment Strategies
Small Cap Equities
Natcan offers a diversified line of small-cap equity investment solutions, across all global markets, including a Québec micro-cap product. Clients can benefit from a team inside which the number of experts exceeds that of the industry standards, thereby allowing a tight follow-up of companies that make up the investment universe. Over 800 company meetings are held each year, an undeniable advantage for an asset class where a qualitative analysis is of the utmost importance.
Management Approach
Our management style is Growth-oriented, which is particularly appropriate for the management of small-cap equities.
Unlike many other small-cap managers, we pay special attention to preservation of capital, and seek growth opportunities across all sectors so as to diversify our sources of added value.
We offer pure Canadian small-cap equity products and as such, we do not hesitate to liquidate stocks when market capitalization has exceeded mandate specifications.
Security selection takes precedence over sector allocation, which we see as complementary. Our natural bias toward industrial, technological, health care, and consumer stocks is rooted in the innovation and long-term growth that characterizes companies within these sectors.
Management Process
The portfolio construction methodology starts with the identification of long-term strategic investment themes or trends that are expected to exert a positive influence on small-cap equity stocks. The objective consists in identifying exceptional growth opportunities, along the lines of the selected investment themes, such as demographics, deregulation, technology, and globalization.
From this investment universe, we perform a twofold analysis, for which the first part consists in a qualitative analysis and the second in a rigorous quantitative study. During the qualitative analysis, we seek out companies operating in a large market and benefiting from sustainable competitive advantages, whose growth strategy puts emphasis on products, clients, or distribution, and whose senior managers are stakeholders, and thus have a vested interest in the success of the company. Any company that does not meet these criteria is automatically eliminated from the selection process.
At the quantitative study stage, we analyze certain characteristics of the companies that met our qualitative constraints, and look for companies that showcase good profitability, superior growth and revenue compared to their industry, a reasonable level of debt, and a return objective of 100% over 36 to 60 months (based on the actualized net value).
Once the companies that meet these criteria are identified, we then proceed to meet with their management for on-site investigations and due diligence. Not only do we visit their centre of operations, we also conduct research with their clients and suppliers.
It is only once all these steps are completed that we are able to build the portfolio, ensuring sector diversification and compliance with specific client constraints. Evidently, this process is ongoing and serves to re-evaluate the quality of the existing holdings.
Management Team
The Small-Cap Equity team, comprised of four investment professionals, namely Christian Cyr, lead manager, Serge Dépatie, Éric Dupont, and Marc Lecavalier, is structured in such a way as to promote a continuous flow of information, and allow its members to draw on the experience and in-depth knowledge of the lead manager, while encouraging new ideas.
It also benefits from the expertise of Natcan’s global equity team of analysts who closely monitor stocks and news in their respective sectors, as well as review the research from independent brokerage firms, brainstorm over investment ideas, and submit their recommendations to the team.
| Strategy | Description | Availability |
| Natcan Global Small-Cap Equity Strategy | The objective of the global small-cap equity portfolio is to outperform the MSCI World Small-Cap Index return. | Pooled Fund (to come) |
| Canadian Diversified Small-Cap Equities | The objective of the Canadian diversified small-cap equity portfolio, which includes a certain proportion of U.S. small-cap names, is to outperform the S&P/TSX Small-Cap Index return. | Pooled Fund Segregated Fund |
| Natcan Small-Cap Equity Fund | The objective of the Canadian small-cap equity portfolio is to outperform the S&P/TSX Small-Cap Index return. | Segregated Fund |
| Québec Micro-Cap Equities | The portfolio is mostly invested in companies whose head office, or a substantial part of their line of business, is located in the province of Québec. | Segregated Fund |
| The Natcan QSSP II Investment Fund Inc.1 | The Fund invests a large portion of its capital in Québec companies that provide a tax advantage via the SPP II. | Pooled Fund |
Please note we also manage regional mandates, such as European and U.S. small-cap equity funds.
For up-to-date information on performance and strategies, we invite you to visit the Natcan Quarterly Bulletins section.