PVSWT is a value oriented, ESG aware Australian equities fund. The fund has a broad-cap focus and leverages the 20-strong Perennial Australian equities research team to identify opportunities across the full spectrum of large, mid, and small cap companies.

The trust has been upgraded by Lonsec from Investment Grade to Recommended. Lonsec’s conviction has increased and is underpinned by the quality and substantial experience of the tripartite portfolio management team, boasting an average experience of 22 years.

Stephen Bruce, Lead Portfolio Manager for PVSWT, said: “We are delighted to have received this rating from Lonsec for our flagship wholesale trust. Our approach has been proven throughout multiple market cycles, and we look forward to building on our 20-year track record. We are particularly excited by the opportunities being presented for fundamental-based investors to add value in the current market environment.”

As at September 2021, the Perennial Value Australian Shares strategy has delivered annualised performance of 9.5% since inception, net of fees.

Lonsec noted the well-resourced and highly experienced investment team, full coverage of the Australian market and “robust and repeatable” investment process.

PCAST, which is available to retail investors, received its first Lonsec rating.

Launched in 2017, the trust invests in a concentrated portfolio of 15-30 companies listed on the ASX, and also employs Perennial Value’s specialist value focus.

Dan Bosscher, PCAST Portfolio Manager, said: “We are pleased that PCAST has received this Recommended rating in its inaugural review by Lonsec. We believe the trust is well positioned to benefit from the post-COVID economic recovery – an environment that offers the potential for significant outperformance for value style investing.”

In its review of the trust, Lonsec said Perennial Value  exhibited many of the characteristics that Lonsec sought in a ‘boutique’ investment manager, including “equity ownership by the investment team, a strong alignment of interests and an investment-oriented culture.”

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Andrew Smith

Perennial’s Private to Public Opportunities Fund No.2 (PPP2, the Fund) has closed its capital raising fully subscribed – attracting $125 million from a wide range of wholesale investors.

PPP2 will invest in high-growth equity opportunities through an actively managed portfolio of 30-45 unlisted, pre-IPO and listed Australian companies.

The launch of the second PPP fund by Perennial follows the success of its first private companies fund PPP1, which has delivered a total return of 31.1%[1] net of fees since inception in August 2019 (including a 5% distribution in July 2020).

PPP2 will employ the same investment strategy as its predecessor fund, with the aim to generate superior returns over a five-year period.

Head of Smaller Companies and Microcaps, Andrew Smith, said “We appreciate the support from investors for our initial PPP fund, as well as the strong demand experienced for PPP2. We are very pleased to reach the maximum fund target size of $125 million for our second PPP fund.”

According to Head of Private Investments, Brendan Lyons, investors have been supportive of the Fund’s investment strategy, which focuses on the Last Private Offer (LPO) undertaken by founder-led companies prior to an IPO or other liquidity event. “Our systematic process, coupled with a large and growing pipeline of private opportunities, provides a diversified investment exposure which is otherwise difficult to access. In addition, increased volatility in global equity markets this year has prompted many investors to seek out alternate sources of return,” said Mr Lyons.

The Perennial team has already identified several private and pre-IPO investments for PPP2, with the deployment of capital to commence immediately. Deputy Portfolio Manager Ryan Sohn commented “We are really excited at the prospects of the companies that PPP2 will be invested in. Two of our initial investments include an e-commerce businesses with significant scale as well as a health technology company with unique IP. We have followed the growth of these businesses for a significant period of time and are delighted to now be part of the journey with them”.

Some of the businesses the first PPP fund invested in include soft tissue regeneration business Aroa Biosurgery, diagnostic testing business Atomo Diagnostics and lung imaging technology firm 4D Medical – all of which have successfully listed on ASX this year.

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Damien Cottier

Australian corporates are shifting their focus away from governance and towards environmental and social factors within the ESG space, according to new research from Perennial.

Perennial’s second annual Sustainable Future Survey shows greenhouse gas emissions are now the most important ESG area of focus for Australian corporates in the next 12-18 months, up from fourth place in 2019.  Worker rights/modern slavery was in second place this year, while indigenous relations also increased in priority.

Damian Cottier, Portfolio Manager of Perennial’s Sustainable Future Strategies, said: “Issues such as climate change, modern slavery and indigenous relations have been garnering a great deal of media and shareholder attention in 2020.  Our survey results capture how Australian corporates are moving to address these issues.”

ESG is becoming more of a strategic focus for many listed companies as they increasingly recognise the positive business outcomes that can result. 72% of survey participants have a corporate strategy specifically referencing ESG or sustainability.

Mr Cottier said that while respondents may be skewed towards those focussed on ESG, it is clear increasing investor and consumer pressure is encouraging more sustainable business practices.  Some 90% of respondents agree that engagement with investors on sustainability and ESG issues is beneficial for their company, up from 85% last year.

Environmental targets on the rise

The environment continues to be a key component of ESG, with more corporates disclosing and measuring targets associated with greenhouse gas emissions.   The number of companies producing waste targets has increased by 7% to 60%.

The survey also found that over half (55%) of respondents agree that a national energy policy would provide a clearer pathway for sustainable investment, helping corporates to plan and invest for a more sustainable future.

Diversity drops down list of priorities

In 2019, diversity was the most critical ESG area of focus for respondents but has dropped to fifth place this year.

“While other issues appear to have overtaken diversity, gender diversity at manager and executive level remains a challenge for Australian corporations,” according to Emilie O’Neill, Perennial’s ESG Analyst. “Respondents appear to place emphasis on increasing gender diversity in executive ranks, with 53% of respondents strongly agreeing this is an area of focus compared to 35% who strongly agree that increasing diversity at entry-level of employment is a focus.

“The result responses suggest some of the key barriers are attracting a gender diverse talent pool within certain industries and strong competition for top female talent.”

Remuneration still a grey area

Remuneration policies are still creating confusion for many Australian businesses, with only half of the respondents agreeing that investors have consistent and clear expectations regarding remuneration policy.

“We think this is a key area to watch going forward given investors have conflicting attitudes towards management incentives – particularly in a COVID-19 impacted environment,” Cottier said.

Perennial has designed the survey to check the ESG ‘pulse’ of Australia’s major businesses.  Around 250 ASX-listed companies were invited to complete the survey in June 2020 during the midst of the Coronavirus pandemic.  Respondents came from a range of industries broadly representative of the Australian index.

“The findings of the report assist us in engaging with companies in our Sustainable Future Strategies; The Perennial Smaller Companies Sustainable Future Trust and the eInvest Future Impact Small Caps Fund (ASX:IMPQ)”, said O’Neill.

“Overall, it is interesting to see the changes in ESG focus areas for ASX-listed companies,” said Cottier. “ESG issues are having a greater impact on share prices, and stakeholders are increasing their expectations.  Companies are looking at ways to improve, albeit there is still some way to go.”

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Cesar Farfan

A year on from the successful launch of its first private companies fund, the Perennial Private to Public Opportunities Fund (PPP1), Perennial Value Management (Perennial) has announced the launch of a second closed-ended fund for wholesale investors.

The Perennial Private to Public Opportunities Fund No.2 (Fund No.2) will be open on 1 September 2020 and close 2 October 2020, with the goal of raising up to $125 million in new capital.

Mr 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%¹ net of fees since inception (including a 5% distribution in July).

“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 the goal of generating superior returns from an actively managed portfolio of 30-45 unlisted, pre-IPO and listed Australian companies over a five-year period.

Expansion of the investment team

The portfolio management team for the Fund comprises Perennial Head of Smaller Companies and Microcaps Andrew Smith, Deputy Portfolio Manager Ryan Sohn, and Brendan Lyons who has recently joined Perennial as a Portfolio Manager dedicated to Private Investments.  Brendan has 26 years’ global experience across equity markets, corporate transactions, financial and industry analysis, and investment management.

Commenting on the appointment, Mr Smith said, “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.”

An alternative source of return

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 6000+ growing and diverse companies which offer high growth opportunities and are 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 – all of which have now successfully 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,” Mr 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 Perennial Private to Public Opportunities Fund No.2 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,” Mr Smith concluded.

Graph 1: Perennial Private to Public Opportunities Fund returns since inception net of fees^* (%)

*Performance of PPP1 shown net of fees. Does not take into account any taxes payable by an investor. Past performance is not a reliable indication of future performance.

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Note: Inception date for PPP1 was 19 August 2019. Return shown is at 21 August 2020 closing valuations, and net of fees. Past performance is not a reliable indicator of future performance.

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Mr Redford-Bell’s role will be pivotal in meeting the wealth creation needs of retail clients in Queensland, with a focus on the distribution of Perennial’s investment solutions through intermediary relationships including independent financial advisers, dealer groups and platforms.

Head of Retail Distribution, Cesar Farfan, said Mr Redford-Bell’s appointment is a welcome addition to strengthen Perennial’s relationships with high-quality advice and wealth management firms in Queensland.

“Perennial is highly committed to the Queensland market. Having an experienced sector professional on the ground will enable us to better service the financial planning fraternity in the region,” Mr Farfan said.

Mr Redford-Bell joins Perennial with over 17 years’ experience in financial services, having previously worked in senior distribution and business development roles at QIC, UBS and Blackrock.

Ms Crandall brings over 17 years’ experience as a senior research analyst to her new role at Perennial Value, having previously spent nine years at Perpetual Investments as the Research Relationship Manager.

Ms Crandall will be based in Perennial’s Sydney office and will work closely with the investment teams.

“I look forward to Marjon joining the team at Perennial, her extensive experience will complement the strengthening of our relationships with research houses and asset consultants,” Mr Farfan said.

Both Mr Redford-Bell and Ms Crandall will work across three of Perennial’s specialist investment boutiques – Perennial, Daintree and Fairlight.

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John Murray

Leading boutique fund manager Perennial Value Management Limited (Perennial Value) has announced that its senior executives planned to acquire the remaining 42.4 percent economic interest in the business from IOOF Holdings (ASX: IFL).

Perennial Value is a specialist, active investment management firm. Established in 2000, Perennial Value invests $5.6 billion on behalf of institutional and retail clients through a suite of trust products and discrete portfolios.

John Murray, Managing Director of Perennial Value, said: “We’re delighted to announce our intention to acquire the remaining IOOF interest in our business. This represents a further significant alignment of interests between our staff and our clients, and is a strong vote of confidence in our continuing commitment to delivering investment excellence, fostering a specialist investment management culture, and building a successful and sustainable funds management business.”

Perennial’s investment products will continue to be offered through IOOF platforms as well as other leading platforms and wrap accounts.

Anthony Patterson, Executive Director of Perennial, said: “This transaction will see the positioning of the Perennial Group as a multi boutique investment firm. We currently operate six boutique investment businesses, three under the Perennial brand, large cap Perennial Value, Perennial Value Smaller Companies and the Perennial Solutions Group, and three boutique affiliates Daintree Capital, an absolute return fixed income business, Fairlight Asset Management, a Global Small Mid Cap specialist and eInvest a provider of active exchange traded managed funds”.

“Our focus for the immediate future is as always on delivering good outcomes for our investors, but with an eye to the longer term, “Patterson said.

“In recent years, we have had a strong focus on building actively-managed niche capabilities.  We recently closed our Micro caps Trust at $200m on the back of very strong performance (total net return of 97.4% since inception in February 2017) and investor demand and also completed a capital raising for our Perennial Private to Public Opportunities fund, a wholesale offer taken up predominantly by higher net worth and family office investors.

“A major focus of this fund is investing in well-managed, strongly growing unlisted companies. We are very optimistic about the prospects for both Daintree Capital and Fairlight, which are both run by top-shelf investment executives who are passionate in their aim of delivering strong returns for their investors. Our ongoing development of eInvest reflects our view of growing investor demand for actively-managed exchange traded funds.”

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John Murray

Strong demand from wholesale investors seeking to invest in the unlisted space has seen Perennial Value attract $50 million only weeks after the firm announced its plans for a new Private to Public Opportunities Fund. The Private to Public Opportunities Fund will close on 16 August 2019.

“We’ve been very pleased by the strong demand from wholesale investors for this new Fund, in particular high net wealth and family office investors. They recognise there’s a gap in the market for opportunities to invest in early-stage companies requiring growth capital,” said Perennial Value Managing Director John Murray.

The new fund is an extension of the Perennial Value Microcap Opportunities Trust, which has a successful track record of investing in private companies that have since become public. This microcap fund has now hard closed after reaching the targeted capacity of $200 million, having returned 30.4% p.a. net of fees since inception.

Examples include EcoFibre (ASX: EOF), Atomos (ASX: AMS), and Uniti Wireless (ASX: UWL). These stocks have generated returns of 444%, 360% and 538% respectively from Perennial’s unlisted investments as at the end of July 2019.

Ahead of the fund’s launch, Perennial’s investment team has identified six unlisted opportunities for wholesale investors. These include:

• Equiem, is a global leader in tenant experience software and is gaining strong traction in the US and UK.
• Lumitron, a low dose x-ray company born out of the California-based Lawrence Livermore National Laboratory.
• Nutricare, a producer of bamboo-based, plastic-free wound care protection products.

Andrew Smith, Perennial’s Head of Smaller Companies and Microcaps, said they are leading the second round of investment into Nutricare.

“Nutricare is fast becoming a substantial player in the global wound care market under the brand name Patch. Following the success of our investment last year, we’re providing further expansion capital to help the company continue its rapid growth in all regions including Australia, the US, Europe, Middle East and South Africa,” Mr Smith said.

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John Murray

The award-winning Perennial Value Small & Microcap team*, led by Andrew Smith is releasing a new strategy – the Perennial Private to Public Opportunities Fund (Fund), exclusively available to Wholesale Investors.

The new Fund’s objective is to generate superior, absolute returns, above a hurdle rate, from an actively managed portfolio of typically 30-45 unlisted growth capital, pre-IPO investments, IPOs and placements over a five-year period.

The Fund will be managed by the seven-person Perennial Value Small Cap team, led by Head of Smaller Companies and Microcaps Andrew Smith with Ryan Sohn a co-portfolio manager.

“Based on our observations in the small and microcaps sector, we have identified a gap in the market and there are tremendous opportunities to invest in companies requiring growth capital,” said Mr Smith.

The Fund will target companies that meet a range of critical investment criteria (including quality management, scarcity, scalable business model with growth potential, and valuation discount). The universe of unlisted companies meeting this criteria are typically hard to access for most investors.

Perennial Value Managing Director John Murray said strong opportunities exist for wholesale investors seeking value in the pre-IPO sector, citing the scale and strong network of the firm.

“The Perennial Private to Public Opportunities Fund offers investors access to capture upside potential of companies early in their growth cycle, whilst avoiding early stage risk associated with seed and venture capital,” said Mr Murray.

The launch of the new Fund follows the success of the Perennial Value Microcap Opportunities Trust, which has delivered 67.2%** cumulative return since inception (February 2017) net of fees to investors and is soft closing (closing to new investors) at the end of June as it reaches the targeted $150M capacity. This capacity limit was set so the team can continue to be a nimble investor in the microcap space.

“We have been pleased with the strong demand for our Microcap Opportunities Trust and it serves to affirm that there are great opportunities for investors in the microcaps universe as brokers find it increasingly difficult to research the growing sector,” said Mr Smith.

“Over recent years we have begun to also deliver impressive returns in the under-researched and difficult to access sector of pre-IPO opportunities/unlisted growth companies – hence our desire to establish this new fund,” he said.

Morgan Stanley Wealth Management has completed due diligence and is partnering with Perennial on the launch of the Perennial Private to Public Opportunities Fund.

Head of Product for Morgan Stanley, Shaun Bornstein says, “We would expect to give a firm commitment of AUD$25 million plus once the documents are finalised. We continue to have a longstanding relationship with Perennial and have confidence in Andrew Smith and his team to continue to deliver alpha throughout any market cycle.”

“The Perennial Private to Public Opportunities Fund is innovative with multiple sources of alpha and has a 5-year lockup period which is consistent with the objectives of the Fund. The team has a proven track record of successfully negotiating deals and driving a private to public premium,” said Mr Bornstein.

The minimum investment for the Perennial Value Private to Public fund is $100,000.

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*Perennial Value’s Small Caps team recently won the Australian small cap equities category in the 2019 Money Management – Lonsec Fund Manager of the Year Awards for the Microcap Opportunities Trust
**As at 30th April 2019

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Andrew Smith

The Perennial Value Microcap Opportunities Trust has been added to the IOOF Pursuit platform, providing investors with access to some of Australia’s fastest growing companies.

The Trust invests in a range of listed and unlisted companies comprised of small and microcap stocks which the fund manager believes has sustainable operations and whose share prices offer good value.

Since its inception on 1 February 2017 to 31st December 2018, the Trust has delivered an annualised return of 24.3%, net of fees, outperforming the S&P/ASX Small Ordinaries Accumulation Index by 18.0% and a cumulative return of 51.6%.

Perennial Value Management Head of Smaller Companies and Micro Caps, Andrew Smith, said having the Trust included on the platform’s investment menu would provide investors with more opportunities to access Perennial Value’s microcap strategy.

“We are pleased that a growing number of investors will now be able to access our Trust. We see vast opportunities in the microcaps sector to unearth investment opportunities that are missed by the broader market,” said Mr Smith.

“The cornerstone of the fund’s approach is a strong emphasis on company research – we aim to develop a detailed understanding of each company before committing investors’ funds,” he said.

“The strategy also has a strong focus on early stage companies which are growing earnings strongly, and can provide important diversification for investors in tough market conditions.”

The Perennial Value Microcap Opportunities Trust has received a ‘Recommended’ rating from both Lonsec and Zenith. The Trust is also available on Asgard, BT Wrap, Macquarie Wrap, BT Panorama, Hub24, NetWealth, Mason Stevens and uXchange platforms.

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John Murray

In a new year that has begun with share market volatility, continued falling property prices and increased talk around recession both in Australia and the US, Perennial Value Management (Perennial Value) cautions against over-negativity on the Australian economy and says the recent market sell-off is opening up opportunities for patient investors to invest in quality companies at attractive prices in 2019.

Investors have begun the year with a high level of nerves due to the fall in the share market in the December quarter, where the sell-off mirrored that seen in offshore markets as a result of heightened political uncertainty around issues such as US-China trade and Brexit, as well as rising interest rates.

Perennial Value Managing Director John Murray says that with all the negative sentiment floating around, it’s easy to lose sight of the fact that the Australian economy is arguably in better shape than many other economies.

“We have strong population growth, albeit it is easing; favourable demographics, with a relatively young population compared to most other developed economies; our government debt levels are low by global standards; and we are one of the few countries boasting a AAA credit rating. The budget is heading back into surplus and both interest rates and inflation remain at low levels,” Mr Murray said.

“Unemployment is low, activity is robust in the infrastructure sector on the back of a large number of major projects and there is likely to be increased investment in the resources sector. The weaker Australian dollar is also acting as a buffer, benefitting export industries and our key education and tourism sectors,” he said.

Looking to the share market in 2019, Perennial Value’s Director of Portfolio Management Stephen Bruce says the recent sell-off has taken the Australian stockmarket P/E to slightly below the long-term average of 14.0x. Further, the overall market gross yield of 6.5% remains compelling compared to term deposit rates.

Mr Bruce said, “Within the market itself there remains a wide valuation dispersion, with many growth and momentum stocks remaining expensive while many value stocks are trading at cheap levels.”

“History shows that at some point these large valuation dispersions normalise and, when they do, there is the potential for a value style portfolio to deliver significant outperformance,” Mr Bruce said.

Australian companies looking strong

“In terms of the market more broadly, our forecasts are for continued, moderate earnings growth over the coming year. In addition, corporate Australia has been paying down debt and balance sheets are in very good shape, which provides the flexibility to reinvest for growth, pay healthy dividends and weather any economic headwinds that may arise,” Mr Bruce said.

Interestingly, this theme was reinforced in late 2018 when Perennial Value analysts visited a wide range of companies in the US.

“What struck us is that, in comparison to US companies, Australian companies’ growth prospects seemed relatively solid and our balance sheets generally seemed to be in better shape too,” Mr Bruce said.

Mr Murray says the global macro environment remains challenging and for investors the investment timeframe is a critical piece to consider.

“Market sell-offs inevitably provide buying opportunities for the more patient investor and I believe that 2019 will provide such opportunities for those looking to build a robust share portfolio for the longer term,” Mr Murray said.

“Many of these opportunities are to be found at the value end of the market and the key is to be seeking companies which are well-managed, possess strong balance sheets, have sound earnings growth prospects and are delivering reasonable dividend flows. These are the companies that will inevitably carry investors through tougher times,” he said.

Perennial Value’s more favoured stock holdings currently include gaming stocks, Tabcorp and Star Group, Link Holdings, Nufarm, fund managers Janus Henderson and Perpetual and Event Hospitality and Entertainment.

Discussing Perennial Value’s resource holdings, Mr Murray said, “We are holding a spread of gold producers – Newcrest, Evolution and Northern Star – who are benefitting from an A$ gold price which is trading at an all-time high. We also see a lot of value in a range of mining services companies, including Ausdrill, ALS and Monadelphous.”

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