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Acorn Capital announces successful raising of funds for for the Acorn Capital Expansion Platform.

Fund manager Acorn Capital announces its successful raising of $52.5 million in commitments for the Acorn Capital Expansion Platform (ACEP).

ACEP, which will undertake venture capital investments in innovative, emerging Australian companies, is targeting businesses with a sustainable competitive advantage and the potential to be leaders in their industries.

Acorn Capital Investment Director James Douglas said the success of the raising showed there was strong appetite from investors for innovative companies at the expansion stage, with investors in ACEP including leading family office groups, private investors and entrepreneurs.

“There is an enormous amount of innovation in Australia, but there is limited capital available, particularly at the expansion stage,” Mr Douglas said.

“ACEP will invest in these innovative companies and leverage Acorn Capital’s long term experience supporting emerging growth companies.” Acorn Capital CEO Robert Routley said: “Acorn Capital’s team is uniquely placed with strong expertise across all industries.

“Acorn Capital’s broad approach provides an opportunity to participate not just in new technologies but in positive economic outcomes for Australia such as employment growth and productivity.”

Acorn Capital is a pioneer in Australian emerging company investment, having invested in names including Redbubble, Telix, amaysim, Genea, Carbon Revolution, Moula Money, Cleanspace Technology, Calix, IAS Group, Aroa Biosurgery and FlareHR.

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George Lucas

Investment start-up app Acorns has seen over 100,000 users sign up to the service after 6 months of operations, revealing more of the nation’s population are looking to take their financial futures seriously.

Launching in Australia in February, 2016, not only does the milestone attest to the app’s rapid popularity – particularly amongst tech savvy millennials – it indicates a trend amongst Australians to look beyond the big four banks for investment and savings opportunities.

George Lucas, Managing Director of Acorns Australia, says the app’s success to date is being driven by young Australians who are discovering the benefits of regular, small investments. 80 per cent of customers have automatic round-ups switched on, investing their loose virtual change. “We’ve been surprised and encouraged by the app’s rapid adoption, particularly in light of political uncertainty both domestically and abroad.

The latest data from Acorns attests to the app’s financial model, with over 95 per cent of the user base seeing a positive return on investment, and personal financial gains (before the monthly maintenance fee).

“The strength of sign-ups shows that there is a high demand for saving and investment assistance, and a clear sign that the market needs and wants this this type of technology offering.

“50 per cent of downloads have been generated by investors aged 25 – 34 years, with 90 per cent of our customers under the age of 45 years. The app is giving them a frictionless way to get invested. Acorns’ technology levels the playing field, opening up the market to all generations.”

Confirming Australia’s appetite for FinTech innovation, Acorns Australia quickly exceeded the comparative growth rate it experienced when the app launched in the U.S.

Australia is the first country to receive the app outside of the U.S., being launched by a joint venture between Instreet Investments Limited and the U.S. start-up Acorns Grow, Inc.

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“Many of the obstacles that investors believe stop them from investing in Asia are easy to overcome and, in our view, the opportunities that await them there are definitely worth the effort.

“While investing in Asia is not without risk, we believe it is also getting safer and simpler.

“Despite the concerns some investors have about the transparency and corporate governance in the region, we have generally found the standard is high and improving.

“It might surprise many Australian investors to know that we usually find Asian small company balance sheets to be more than adequate for their growth ambitions, which we think may be a function of the hard lessons learnt during the 1997 Asian Financial Crisis and the Global Financial Crisis in 2008.

“Shrewd investors are already seeking to take advantage of this by increasing their international exposure, and the results have been positive.

“For instance, a study in 2014 showed the superannuation funds ‘that performed best were those that had a higher exposure to international assets, especially shares and property’. But many investors, including trustees of self-managed superannuation funds (SMSFs), are yet to realise the potential benefits of increasing their investment allocation to international equities,” Mr Quah said.

Research suggests that Australian investors hold a 73 per cent share in Australian equities, and Mr Quah says the risks of this bias can be expected to compound as a result of continuing superannuation inflows and the general softening unfolding in the Australian economy.

“Asian small caps have significantly outperformed Australian small caps by at least 7 per cent a year over the past five to 10 years.

“They have also outperformed the broader Australian market by 2.8 per cent a year over the past 10 years.

The Acorn Capital Asia Small Cap Fund’s deep dive approach has seen it better the broader market performance, posting a return of 36.05 per cent for the year to 30 June 2015 (after all fees), an outperformance of 7.12 per cent against the MSCI Asia ex Japan Small Cap Index.

“There is still more upside”, Mr Quah said.

“The fundamental story for Asian small caps is even more enticing. To start with, the opportunity set is large, spanning more than 5,000 companies across the 10 key Asian markets.

“Unlike their larger Asian counterparts, Asian small caps allow company managers to position for new growth opportunities, whether it be locally or internationally, without the constraints of government ownership ties.

“Another benefit is that Asian small cap investment opportunities are generally not as well known.

“An advantage of this anonymity is that the growth of Asian small cap investment opportunities is not already ‘priced in’.

“This is borne out by the lack of professional analyst coverage or institutional shareholdings in these companies – something Australian investors are able to benefit from,” Mr Quah said.

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Douglas Loh

The creation of an emerging companies category for the Significant Investor Visa (SIV) program has the potential to be an important source of capital for emerging listed Australian companies, said Mr Douglas Loh, head of equities, Acorn Capital.

Speaking at the Basis Point third annual Significant Investment Visa conference, Mr Loh said: “The changes to the SIV complying investment categories will provide a valuable additional source of funding for emerging listed Australian companies and will promote the growth of this sector.”

He said the target for the SIV is generally wealthy Asian investors looking to immigrate to Australia.

Mr Loh said, “Often they have children who have attended or are looking to attend universities in Australia and they are attracted to the lifestyle and opportunity here. The SIV program is a good way for them to understand a more mature and developed investment market and to eventually gain Australian residency.

“With residential property excluded from the categories of complying investment status for SIV investors, it removes the risk that SIV investors will drive up prices in an already hot property market.”

The Acorn Capital Microcap Fund is one of the few funds to invest in Australian emerging companies/microcaps that complies with the Government’s new SIV investment framework. The Fund has a 14-year track record of investing in microcap stocks and building a diverse portfolio that Acorn Capital believes can generate long-term outperformance.

By identifying and exploiting mispricing in the microcap sector, the Fund has successfully outperformed its benchmark over the long term, and has returned 9.2% p.a. since inception.[1]

Mr Loh said, “We believe SIV investors, in particular, will look to established and well known managers that can demonstrate longevity and good risk management controls.

“Previously, the bulk of money flowing into Australia through the SIV program was into passive investments, such as government bonds and residential real estate schemes, which already attract large capital flows.”

On 1 July 2015, the Government changed the SIV investment framework so that investors need to invest at least $5 million over four years into three categories of complying investments, which must now include:

• $500,000 in venture capital and growth private equity funds
• $1.5 million in emerging companies
• $3 million in balancing investments – complying investments include Australian corporate bonds, shares and property (excluding residential) through managed funds or listed investment companies.

[1] Returns are calculated after fees and expenses and assume the reinvestment of distributions. Past performance is not a reliable indicator of future performance. Inception date for performance calculations is 28 February 2001. Benchmark is the Acorn Capital/SIRCA Microcap Accumulation Index. SIRCA is the Securities Industry Research Centre of Asia Pacific.

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This is the second senior appointment in the past 12 months, says head of equities Douglas Loh. Mr Dalling will be responsible for the Financials, REITs and Industrials – Capital Goods sectors.

Mr Dalling joins the company from Citi where he was Head of the Emerging Growth team. His earlier roles include working as an Assistant Portfolio Manager and Senior Analyst at Challenger Financial Services, as an Analyst at Goldman Sachs JB Were and HSBC, and as an Economist at ANZ.

The appointment builds on the already well-resourced Acorn Capital team, and follows the appointment of Paul Quah in July 2013, who joined the Asian side of the business from Hong Kong based CLSA Asia-Pacific where he was head of regional and small cap research for the previous six years.

“Ben has 20 years’ experience in the industry with the last 15 years as a buy and sell side analyst with particular focus on Australian and Asian REITs, and property developers and contractors. In recent years his coverage has extended to companies in the consumer, commercial services and mining services sectors,” Mr Loh says.

“He brings a research approach which is totally consistent with the Acorn Capital methodology. Ben’s depth and breadth of experience will complement the strong research capability of the Acorn Capital team.”

Acorn Capital runs investment teams across three sectors; Australian listed microcaps, Australian unlisted microcaps and Asian small caps.

“We believe that there is significant value for investors by bringing together the industry knowledge and information gained from across these three areas when making our investment decisions,” Mr Loh says.

“Acorn Capital is a strongly resourced investment boutique manager with a team of 19 investment professionals. In line with the company’s plan to increase the breadth and depth of our team, we are in the process of recruiting another experienced senior investment analyst to work across the listed and unlisted Australian microcap sectors.”

Mr Dalling has a Bachelor’s Degree in Economics and a Master of Commerce. He will commence with Acorn Capital in the coming weeks.

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