A diversified portfolio of Australian microcap companies:
Acorn Capital (Acorn) constructs microcap portfolios from the full universe of ASX sectors, the full range of company development stages, and both listed and unlisted IPO opportunities.
Investment management by Australia’s most experienced microcap fund manager:
Acorn is the pioneer of Microcap company (Microcap) investing and is Australia’s longest running specialist microcap fund manager.
Strong fee alignment and capacity management:
- A performance fee will only be paid if the fund’s returns are above both the benchmark and 0%
- Acorn will hard close the fund at $150m, thereby preserving and optimizing return potential for existing investors
Unit Price (Entry)
April 30 2022
Unit Price (Exit)
April 30 2022
AN INVESTMENT STRATEGY DESIGNED TO CAPTURE THE INVESTMENT RETURNS ASSOCIATED WITH INVESTING IN EMERGING COMPANIES
WHAT ARE MICROCAPS
Microcaps are amongst the most dynamic companies listed on the Australian stock exchange (ASX). They have a market capitalisation of less than $500 million. Compared to larger capitalisation (Large Cap) companies, Microcaps are typically younger, faster growing, and more innovative. Such companies often report greater increases in sales, profitability, and productivity than older, larger and less innovative companies. Further, they are often require capital to fund higher growth and the fund is positioned to provide growth capital.
Microcap investing provides exposure to earlier stages of a company’s development, with the majority of microcap businesses being in (or about to enter) the growth or expansion stages of their lifecycle. Microcaps also provide exposure to different investment themes than Large Cap. For example, the ASX microcap segment has greater industry diversity and is less concentrated in Financial and Resources companies than the Large Cap segment.
The fund aims to:
- Outperform the S&P ASX Emerging Companies Accumulation Index (the benchmark) over rolling 3 year periods
- Generate its returns with lower volatility than the benchmark
Acorn seeks companies displaying sustainable competitive advantages and investment risks that are commensurate with their return potential. These advantages are usually underpinned by innovation and come in many forms: a technology, a drug, a business process, intellectual property, a brand, or being first to market. Investment risks vary considerably by both industry and by stage of company development: Start Up, Early, Expansion, or Mature Growth stage.
Acorn also seek portfolio diversity, believing opportunity can be found in all industries and at all stages of company development. To capture this return, and to manage portfolio risk through diversification, Acorn’s large team of industry-experienced analysts scour the full investment universe. This include sectors and stages of company development that many other managers find too difficult to assess, such as Biotech, Resources, and Early stage companies. The resulting short list of best ideas then undergoes an extensive due diligence process, with research to establish each company’s true sustainable competitive advantage, and its upside potential and downside risk. Ultimately, a well diversified portfolio of 50 – 70 stocks is constructed taking into account each stock’s potential return and risk, its sector and stage of development, and each analyst’s level of conviction in that stock relative to all other investment opportunities.
The fund can invest up to 10% of net assets in Australian unlisted companies where a liquidity event, such as an IPO or trade sale, is likely within 6-12 months. Further, where insufficient opportunities meet or exceed Acorn’s return for risk hurdles the fund will hold cash (up to 20%) until suitable opportunities can be found. The fund may also invest up to 20% of net assets in gold stocks.
- Capital growth through a diversified exposure to Australian Microcaps
- An active investment approach
- A long term (5+ year) investment
- A SIV compliant investment
*As defined by the Corporations Act
FOR FURTHER INFORMATION
KEY FUND TERMS
Type Unregistered Unit Trust.
Objectives Exceed the returns of the benchmark over rolling 3 years periods.
Objectives Lower volatility than the benchmark.
Benchmark S&P/ASX Emerging Companies Accumulation Index
Investment Universe Australian Equities1,2 80-100%, Unlisted investments3,4 0-10%, Cash 0-20%.
Stocks # 50-70.
Investment timeframe 3-5 years.
Minimum Investment $50,000
Management fee 0.90%5
Performance fee 20% of returns in excess of the benchmark6,7,8,9
Sector limits Minimum of 5 sectors10 Maximum of 20% of the fund’s net assets allowable in any one sector
Lifecycle stage risk guidelines Seed/startup 0-5%, Early 0-40%, Expansion 40-70%, Mature 10-20%
Borrowing The fund is permitted to borrow up to 5% of NAV to apply to redemptions. Borrowings may not be used to leverage or gear the fund.
Shorting The fund is long only. The fund is not permitted to short sell securities.
Trustee Acorn Capital Limited.
1. ASX ex $500m market capitalization stocks at time of purchase. Up to 30% of fund net assets can be held in Australian companies that subsequently grow beyond $500m.
2. Positions will only be taken in Australian unlisted companies where a liquidity event (e.g IPO, trade sale) is likely within 6-12 months.
3. Unlisted securities may include equity and convertible notes.
4. No further purchases can be made in any company that exceeds 10% of the fund’s net assets.
5. Exclusive of expense recoveries of 15bp (excludes deal related legal fees and deal transaction costs).
6. Subject to prior High Water Mark (HWM) being exceeded (no HWM resets allowed).
7. Subject to the Fund’s return also exceeding 0%.
8. Calculated after management costs and expense recoverables have been deducted.
9. Calculated daily and paid quarterly.
10. Acorn defined sectors (GICS or aggregated GICS, with Acorn reclassification of companies where appropriate).
The rating issued 02/2022 is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445 (Lonsec). Ratings are general advice only, and have been prepared without taking account of your objectives, financial situation or needs. Consider your personal circumstances, read the product disclosure statement and seek independent financial advice before investing. The rating is not a recommendation to purchase, sell or hold any product. Past performance information is not indicative of future performance. Ratings are subject to change without notice and Lonsec assumes no obligation to update. Lonsec uses objective criteria and receives a fee from the Fund Manager. Visit lonsec.com.au for ratings
information and to access the full report. © 2022 Lonsec. All rights reserved.
ACORN CAPITAL’S TRACK RECORD OF SUCCESS AND INVESTMENT EDGE
The Fund’s strategy will allow it to access differentiated investment opportunities as compared to the ASX250.
Acorn has significant experience investing in emerging growth companies.
ABOUT ACORN CAPITAL
DIVERSE DEAL FLOW
Powerful networks, industry access, team experience and limited competition.
Acorn Capital was established in 1998 as a specialist investment manager in emerging Australian companies. Acorn Capital distinguishes itself through its relatively large research and investment team with expertise across all industries, as well as its provision of expansion capital to developing companies.
Acorn employs the largest microcap / emerging companies investment team in Australia. The team comprises 10 investment management professionals with combined industry experience of 160 years. Two of Acorn’s most senior investors, Paul Palumbo and Robert Bruce, are co-Portfolio Managers of the Acorn Micro Opportunities Fund.
CORE INVESTMENT TEAM
- Paul Palumbo 15yrs Experience
Paul is the Head of Portfolio Implementation and Portfolio Manager/ Analyst for the Healthcare and Biotechnology sectors. Prior career at PwC & IBM Business Consulting.
- Robert Bruce 23yrs Experience
Rob is the Head of Research and Portfolio Manager/ Analyst for the Consumer and IT sectors. Prior career at CLSA, UBS Warburg, Kaplan Funds Management and Westpac Institutional Bank