Ken Jesudian, a protege of Canadian value investor Prem Watsa, has left his role as head of Burgundy Asset Management Ltd. to set up his own investing shop focused on small-cap stocks.
Crimson Asset Management is geared toward wealthy individuals with a minimum investment of C$1 million ($780,000).
It currently offers a partners’ fund that invests in a concentrated number of companies with at least $2 billion in market cap, and is launching the first of a series of specialty funds that will predominantly focus on U.S. small caps, with 15 per cent to 20 per cent of its holdings in Canada.
"It’s a little bit NFL to CFL,” Jesudian said, referring to the professional football leagues in both countries, when asked why he prefers the U.S. to Canada. “The diversity of business models is much greater than what Canadian investors are used to seeing. It’s just a bigger pond to fish in.”
He’s particularly interested in financial services, consumer discretionary and software stocks, but will invest across sectors.
“We will look at virtually everything but we gravitate towards the businesses that can grow their earnings per share over long periods of time,” he said. “We’ll look at energy services companies if oil is down and out. Energy services is an area where I’ve made quite a bit of money in the past.”
The small-cap fund will be limited to C$350 million of capital so it can invest in companies with market caps as small as US$70 million.
“By controlling the amount of capital, we can build great rapport with the management, know them hopefully better than anybody else,” Jesudian said. “That’s the kind of thing that leads to outperformance over a long period of time.”
Jesudian, 46, started his career as an investment analyst at Watsa’s Fairfax Financial Holdings Ltd. before climbing the ranks to chief executive officer at Burgundy.
“I can remember telling Prem it was a dream to start my own firm one day,” he said.
Crimson has a small team of seven and an advisory board including Tony Hamblin, founding partner of Watsa’s first asset management firm, and Tony Gage, founder of Phillips, Hager & North Investment Management Ltd., now owned by Royal Bank of Canada.