Founded in 2010 in Edinburgh, Amati Global Investors is an independent asset management firm specializing in small and mid-cap equities. With a focus on dynamic areas of the market, Amati manages several funds, including the Amati AIM VCT, WS Amati UK Smaller Companies Fund, WS Amati Global Innovation Fund, and WS Amati Strategic Metals Fund. The firm is known for its careful analysis and active management approach in curating diverse portfolios of smaller companies capable of performing in varied market conditions.
Small-cap investing presents unique challenges that differ significantly from large-cap investing. Unlike large companies with extensive analyst coverage and standardized reporting, smaller companies require broader diversification and more intensive monitoring to identify non-financial risks early, before operational, reputational, and financial impacts occur.
"[Small and mid cap] companies have a lot more company-specific risk, and that is probably the biggest challenge. So many more things can go wrong. And when they go wrong, it's normally more painful. That's everything you can think of. From competitive pressures being bigger, to governance being poor, to losing key people, getting kicked out of key markets. Customer concentration being too high. A division going wrong resulting in more damage than it would if it was a bigger, more diversified business," explains Dr Paul Jourdan.
This higher risk profile requires a different approach to portfolio management. "We tend to have more holdings than you might find in a large-cap fund, so we cover a lot of ground, and we have pretty wide diversification," notes Dr Jourdan. "Some large cap managers say, well, you only need like 25 stocks in the portfolio and you're fully diversified. That's not really true with small companies."
Amati implemented Auquan's agentic AI platform across their investment strategies to enhance their risk monitoring and company analysis capabilities. The platform serves as an early warning system for potential issues and helps extend their research capabilities.
"It's a way of tracking off-the-beaten-track risks. It's a little bit unpredictable when it's useful. You know, it's a bit like an insurance policy - you're covering a lot of less looked at parts of public information that sometimes flash up and show you something that you need to see." explains Dr Jourdan.
The platform is particularly valuable for monitoring international operations and local developments. "It's very useful, obviously, with mines. If there's protests going on that we haven't heard of quite yet – trouble brewing under the surface – Auquan is picking up that kind of local language coverage and putting it in front of you," notes Dr Jourdan.
"I've got it set up for our three teams and I always have a look on a daily basis to see if anything new has come in overnight that's of interest," explains Inez Ling, Research Associate at Amati Global Investors. "It's a really nice facility to have - to either back up what I have found in my other research or when it brings up new information that we weren't aware of.”
Amati continues to expand their use of Auquan across strategies, seeing it as a key tool for maintaining sophisticated investment processes in small-cap markets. The platform's ability to extend their "peripheral vision" and provide early warning of potential issues has proven particularly valuable in managing the unique risks of smaller company investing.
"Rarely does something come out of nowhere and just land on the front page of the New York Times or the Wall Street Journal," concludes Dr Jourdan. "Usually when you backtrack on these things that hit the front page of a world newspaper, there is a trail leading up to that. There is a trail, and it just might be very faint, and it might just be out there on the periphery. So you need to have a system that highlights it, so you at least glance. That's what Auquan's about."
Implementing Auquan has transformed how Amati monitors their small-cap portfolios.
"I would say maybe every couple of weeks there might be something that's relevant for me to take a note of, just to keep an eye on, just to make the fund managers aware in case they hadn't seen it in other places," explains Dr Jourdan.
"It's definitely useful for the underdeveloped markets that might not quite have hit our news," notes Dr Jourdan. The platform helps identify potential issues before they escalate, enabling proactive engagement with portfolio companies.
"I'd say it allows us to be a bit more systematic and maybe a good analogy is like having a slightly wider windscreen at the front of your car to see out of - broadens your view a little bit and helps you capture some things you might otherwise miss."
"It points us to sources which we'd have struggled to find otherwise. Some of which were not very well known and not even well understood by people in the City. So then you're dealing with an issue from a point of view of better knowledge."