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.
HLB Mann Judd sees IPO gold rush
After a soft streak in a chaotic 2020, the IPO market is expected to take off with a “strong pipeline” of new floats coming through 2021, according to HLB Mann Judd.
The Australian IPO market is gaining pace after a sluggish period that saw a scant $132 million raised in the first half of 2020, with the end of 2020 “one of the largest quarters by volume that (HLB Mann Judd) had seen for some time” and $2.9 billion raised in the first half of 2021, a result primarily driven by 13 large cap IPOs.
“There’s been a very strong recovery in listings. It’s been very, very healthy, particularly in the materials sector. There’s a very strong demand for IPOs and capital raising in the materials sector, led predominantly by gold,” said Marcus Ohm, partner at HLB Mann Judd.
“Activity was driven by favourable macroeconomic and capital market conditions together with strong investor sentiment, and reflected the strength of the market as a whole with the ASX All Ordinaries index growing by 11% over the six month period.”
Still, IPO performance was “subdued” compared to the wider market. New listings saw an average gain of 6 per cent in the period, which Ohm said was a “surprising trend” given recent years of substantial outperformance
Five of the 13 large cap IPOs were contributed by the materials sector, with future forecast commodity prices and a solid near-term outlook driving demand for key commodities, and materials lead the future pipeline of listings. Of the 42 listings on the horizon at end June, 27 are materials listing looking to raise a total $707.4 million, with 15 holding gold projects – the “flavour of the month”, according to Ohm.
The best performing sectors were pharmaceuticals, biotech, and life sciences, which recorded average period end gains of over 15 per cent; the worst performing sector was commercial and professional services, which saw an average period end loss of 31 per cent, while the single listing in consumer durables and apparel ended with a 48 per cent loss for the year. HLB Mann Judd also observed a slackening in the number of fintech and tech IPOs coming to market, but believe their numbers will pick up before the end of the year.
