Invest boldly Manage risk wisely

Our Investment Philosophy

The Millrace Investment Philosophy is based on three fundamental principles:

Invest Boldly Manage Risk Wisely

To grow capital after expenses, investors need to include assets with high growth rates in their portfolio. Smaller capitalization growth companies can provide this high growth rate opportunity, but they also carry more risk and their stocks are volatile. The biggest roadblock to successful wealth creation is losing capital during market downturns. To compound returns productively, investors need to make bold investments when they have high research conviction while minimizing drawdowns with sound fundamental analysis and disciplined portfolio and risk management practices.

Smaller is Better

Smaller companies are less efficiently followed, understood, and valued than larger companies. Many are innovation leaders capable of sustaining high levels of growth for long periods, but they are also prone to business disruptions. These factors provide a constantly changing universe of long and short investment opportunities that can be exploited. However, growth in a firm’s AUM beyond a certain point is counterproductive to returns for firms focusing on smaller companies. To protect our clients' interests, Millrace commits to limit our AUM capacity to ensure trading access to smaller companies and to preserve the special culture of our firm.

Empower Your Team Members

At Millrace, we empower investment team members to make investment decisions based on their research convictions.  Many investment firms work through a committee structure to review and approve portfolio recommendations.  This bureaucracy creates delays and slippage in the investment process that frequently damages or prevents the implementation of good investment ideas while also frustrating experienced investment professionals.  In contrast, at Millrace we seek to minimize bureaucracy by delegating responsibility and authority to the person closest to the research on each portfolio holding. This is most effective with an experienced, focused team that collaborates effectively and shares a disciplined approach to setting price targets, making sell decisions, and structuring the overall portfolio.