The ASX small-cap stock L1 Group Ltd (ASX: L1G) is one business to keep a close eye on, in my view.
It's a very new name to the ASX following the merger/acquisition of Platinum Asset Management.
Aside from the Platinum funds, L1 also has a number of its own funds including the listed investment company (LIC) L1 Long Short Fund Ltd (ASX: LSF), L1 Capital Catalyst Fund, L1 Capital International, L1 Capital Global Opportunities Fund, L1 Capital UK Residential Property Fund and L1 Capital Gold Fund.
There are a few reasons why I think this ASX small-cap stock looks like an excellent investment for the long-term.
Merger benefits
Following the merger between L1 and Platinum, management are expecting to reap substantial benefits.
The company is expecting efficiency benefits of (pro-forma) $20 million of pre-tax net synergy and cost savings.
This is expected to be materially-boosting for earnings per share (EPS), with a double-digit rise in EPS in the 12 months after the deal and add more than 30% to EPS in FY27.
Following completion of the deal, the L1 leadership are expected to hold significant chunks of L1 Group shares. L1 Capital co-founders Mark Landau and Raphael Lamm will together own around 66% of the business, as well as another 8% combined by the L1 Capital chief operating officer and former L1 Capital portfolio manager.
Strong fund performance
One of the most important aspects of a fund manager is the fund performance they deliver for investors.
The ASX small-cap stock has an excellent track record of strong returns with some of its funds and this is a very powerful force for growing funds under management (FUM).
For example, the L1 Capital Global Opportunities Fund delivered an average return per year of 27.4% over the 10 years to 31 August 2025 and has delivered positive returns every calendar year since inception in 2015.
The L1 Capital Long Short Fund has delivered an average return per year of 18.7% since the strategy's inception in September 2014. This strategy is a significant part of the company's FUM.
If L1 can continue growing FUM at a pleasing pace, it could be a very underrated buy because fund managers typically trade on a relatively low price/earnings (P/E) ratio.
Compelling offerings
L1 is not like a typical Australian equity manager that's focused on ASX shares. I like the different strategies that it can provide clients which are very different to the low-cost exchange-traded funds (ETFs).
A gold fund, a UK property fund, a high-performance international fund – it's a diversified array of funds.
In this time where investors can gain exposure to shares very easily for a very cheap price, it's important for fund managers to offer investments that are strong-performing and/or very different to what's available on the market. I think L1 Group is very capable of doing that, making this ASX small-cap stock a compelling buy.
