Business News

SMSFs trust advisers on IPO selection

SMSF investors who felt confident with their financial adviser were relying on their expertise to seek and recommend initial public offering (IPO) opportunities.

“Over the last year, that’s what we saw,” HLB Mann Judd managing partner Tony Fittler told selfmanagedsuper.

“People were starting to pull money out of cash and listen to their adviser, and with our clients it’s typically the larger companies that they invest in.”
Of those SMSFs allocating money towards IPOs, there was a distinct preference and bias towards familiar names, Fittler said.

“Historically, Australian investors have always been very interested in getting into IPOs and I think it’s always been very strong,” he said.

“The issue is that there’s an unfortunate weighting to well-known names, whereas there might be another business over here, which is a great business with not much risk and solid revenues and while it will still generally get people to invest their money, it’s certainly less of an appetite than the big name.

“So the brand has a higher weighting than it probably should.”

He added investors were still conscious of emerging investments as many lost money during the global financial crisis.

“There’s been a fair bit of an interest from SMSFs as there’s been an education [effort] around not having 100 per cent of your portfolio in cash,” he said.

“What’s helping is the drop in cash rates. If it drops down to 2.5 per cent or even 2 per cent, people will start to have a mind change.”

Fittler’s comments come after HLB Mann Judd last week published its “IPO Watch: The market for emerging companies” report, which revealed investors had a preference for large-cap IPOs over smaller entrants for the first time since 2007.

The theme was expected to resume this year.

The report found that during 2014, large-cap IPOs dominated the market in both quantity of listings and funds raised.

Last year, there were 58 IPOs, raising a total of $16.1 billion.

Of those IPOs, 67 per cent were by companies with a market cap of over $100 million and large-cap entities represented 99 per cent of all funds raised.

HLB Mann Judd Perth partner Marcus Ohm, who authored the report, said investor activity significantly indicated strong support and bias towards those companies with established and predictable earnings.

“Investors have been fairly picky with where they want to put their money,” Ohm said at the firm’s media briefing in Sydney last week.

“So [they’ve invested in] those businesses that are generally larger, more established and perhaps perceived to have less risk, with reasonable prospects of growth going forward.”

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