Angela Ashton

In an environment of low interest rates and returns, the pre-IPO and small cap equities sector offers high growth opportunities for investors, according to new specialist alternatives Research firm Evergreen Ratings.

“The listed market clearly offers attractive growth opportunities but it is the pre-IPO private market that is gaining more attention. The performance of the pre-IPO market is broadly linked to the strength of the underlying equity market and investor appetite for equity capital market and IPO transactions.

“The returns generated across the pre-IPO market have been very strong and continue to attract specialist fund managers to this area,” notes Angela Ashton, founder and Director of Evergreen Ratings.

One of the fund managers in this sector is Bombora Investment Management which offers the Bombora Special Investments Growth Fund (“Fund”) investing in Australian and NZ based pre-IPO enterprises and listed small caps.

This Fund has recently scored Evergreen Rating’s top rating of “Highly commended”.

Evergreen Ratings note: “The Fund returned +29.8% in the 12 months to 31 December 2020, and has doubled in value since its launch less than three years ago, currently holding $78 million in funds under management.

“It is designed to capture early-stage growth from Australasian companies that use technology as a disruptor across sectors that cover technology, telecommunications, media, healthcare and financial services. The asset allocation model of 40-50% listed companies, 40-50% pre- IPO companies and 10-20% cash provides access to both high growth businesses and a significant level of liquidity not normally found in Bombora’s small peer group.

“Diversification is paramount to the decision making and an essential element behind portfolio construction and management.”

The Evergreen report notes Bombora Investments Management (BIM) comprises a team of experienced investors and specialist advisors, headed by Mike Hill, who provide advice to fund companies on capital raisings and operational strategy and a range of advisory services including governance, reporting, management structure, recruiting and mergers and acquisitions counsel.

“The Manager’s senior members have a significant portion of their wealth invested in the Fund. This co-alignment of interests with external investors provides significant comfort to Evergreen,” notes the ratings report. The alignment of BIM with investee companies allows those companies to benefit from BIM’s IPO experience.”

Investee companies in which Bombora has aided in taking to public markets prior to the launch of the fund include:

Rhipe (ASX: RHP) a leading cloud software licensing expert in the APAC region; litigation funder JustKapital (ASX :LAW), Livetiles (ASX:LVT), developer of digital workplace platforms; DMC (ASX:DMC) Design Milk, a luxury designer goods online market place; Janison (ASX:JAN) a digital education provider; ACROW (ASX:ACF) provider of formwork to and construction industries, and Pacific Knowledge Systems (ASX:PKS) provider of automated decision making process in healthcare organisations

A recent investee company pre-IPO capital raising involving Bombora was a 2020 raising for software content company, ORBX, that specialises in developing flight simulation graphics.

Mike Hill, Managing Director and Co-CIO, adds: “The December 2020 quarter was another busy period for us, with multiple new pre-IPO investments securing additional funding including Bike Exchange (ASX:BEX), MadPaws Limited (ASX listing ~ March 21), Nviso Limited (ASX listing ~April 21) and Mobecom Limited (ASX:MBM). We also successfully added new listed securities, participated in a series of IPOs and divested overweight positions across the portfolio.”

“The pipeline of opportunities is significant and we now have a number of our earlier investments which will hit the ASX boards through the first half of CY21. This is an exciting time for the team,” he says.

Gregg Taylor, Co-CIO Listed Equities notes: “Bombora continues to provide attractive co-investment opportunities to our Fund investors enabling enhanced returns in a very strong pipeline of new transactions.

“The outlook for the Bombora Fund continues to be positive across all segments of the portfolio and the whole team is working hard to guide these emerging growth companies as they execute operational objectives.”

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Marc Washbourne

Private capital investment is booming and last year the Australian industry reached a new high of more than $30 billion in assets under management.

Growth capital investors will meet in Sydney this tomorrow (29 August) to discuss developments in the private investment sector and the value it creates for the Australian economy.

Large private equity deals, such as global firm KKR’s recent $2.2 billion-dollar acquisition of Arnott’s biscuits, make the headlines. But smaller transactions, most of which are growth capital deals, account for a large proportion of investment.

While they attract less attention than large buyouts, growth capital deals do more to stimulate the local economy, including creating jobs.

These deals are also more accessible to smaller investors including family offices self-managed super funds (SMSFs) and high net-worth individual investors which is resulting in new inflows of capital.

Other trends to be explored at the event will include:

• There is a growing number of investment managers – including some with large funds – focusing on growth capital deals;
• Growth capital investment structures breaking away from conventional private equity models, and
• Convergence of private equity and venture capital in the growth capital deals space.

Growth capital has no strict definition but is accepted as referring to an investment intended to accelerate development of an established business which has an operating model with potential for fast growth. Unlike private equity buyout deals, growth capital investments are generally not leveraged with debt. They are, however, usually accompanied by extensive operational support.

In addition to investors, speakers at the Growth Capital Forum includes founders who have accepted this sort of investment. The delegate list for the new event reflects the growing interest from these investors.

The event is being held at the Museum of Sydney and will kick-off with a buffet lunch and networking.

The lead sponsor for Growth Capital Forum is fund management technology company Apex Group. Supporting sponsors are professional services firm Ernst & Young (EY), financial services company Velocity Trade, which provides tailored foreign exchange services, and specialist growth capital M&A advisory business Eaton Square.

Speakers include:

• Marc Washbourne: founder and chief executive of ReadyTech
• Tom Matthews: Pemba Capital
• Justin Ryan: Quadrant Growth Fund
• Philip Latham: Navis Capital
• David Odgers: IFM Investors
• Les Szekely: Grand Prix Capital
• Brett Owen: Potentia Capital
• Rajeev Gupta: Alium Capital
• Chris Barter: King River Capital
• Gregg Taylor: Bombora Group

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