Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Perennial private companies fund seeking $125m
A year after it launched its first private companies fund – the ‘Perennial Private-to-Public Opportunities Fund’ – Perennial Value Management is set to launch a second similar closed-end fund for wholesale investors. The ‘Perennial Private-to-Public Opportunities Fund No.2′ will open tomorrow (September 1) and close October 2, with the goal of raising up to $125 million.
Cesar Farfan, Perennial’s head of retail distribution, said the launch was in response to strong investor interest following the success of the first fund, which is now fully invested and has delivered a total return of 31.6 per cent net of fees since inception. “Off the back of the strong performance of our first fund, we have seen high demand from institutions, high net worth investors and family offices for further investment opportunities in this exciting space,” he said.
Fund No.2 will employ the same investment strategy as its predecessor, with an actively managed portfolio of about 30-45 unlisted, pre-IPO, plus some listed Australian companies over a five-year period. The portfolio management team for the fund includes: Andrew Smith, Perennial’s head of smaller companies and microcaps; Ryan Sohn, the deputy portfolio manager; and, Brendan Lyons, who has recently joined Perennial as a portfolio manager dedicated to private investments. Lyons has 26 years’ global experience across equity markets, corporate transactions, financial and industry analysis, and investment management.
Smith said in a prepared statement: “Brendan will have an excellent impact, and we are particularly keen to leverage his commercial skills to provide transaction support and advice to our investee companies to enhance and accelerate returns for our investors.”
Perennial’s new offering targets a part of the market that is difficult to access for individual investors – sitting between venture capital and the listed market – a universe of more than 6,000 diverse companies which offer high growth opportunities and are, typically, one to three years away from an ASX listing or other liquidity event. Businesses which the first fund invested in include soft tissue regeneration business Aroa Biosurgery, diagnostic testing business Atomo Diagnostics and lung imaging technology firm 4D Medical. Each have subsequently listed on the ASX.
“A key drawcard for investors is access to these private growth companies at attractive valuations, as well as the low correlation these investments offer to listed equities,” Smith said. “In recent months, we have seen increased volatility in Australian and global equity markets, which has prompted many investors to seek out alternate sources of return.”
The ‘No.2 fund’ is seeking to raise at least $50 million from wholesale investors, up to a maximum of $125 million. The minimum investment amount is $100,000. “We have been delighted with the strong take-up of our first fund and are pleased to be able to offer investors a new way to access this under-researched area of the market,” Smith said.
– G.B.
