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SMSF interest in IPOs likely to lift

The current low interest environment facing SMSF members is likely to encourage them to consider allocating more money toward initial public offerings (IPO), the partner of an accounting firm has said.

“With the self-managed super funds I see there is very little real blue sky in there,” HLB Mann Judd managing partner Tony Fittler said at a briefing in Sydney yesterday.

“Coupled with the interest rates being so low, I think SMSF members are saying ‘I might put a small investment in some of these new floats’.”

Fittler added SMSF investors would still most likely gravitate toward IPOs involving companies with larger capitalisation levels, but would view the IPO market with increased interest this year.

He emphasised SMSF allocations to any IPOs would not be substantial and certainly not near the $100,000 mark.

Furthermore, the ability for SMSFs to participate in IPOs has received a boost due to a new rule introduced by the Australian Securities Exchange in November last year.

“They’ve got this new rule that has been brought in called the free float requirement. It basically means that 20 per cent of shares on issue can’t be in what we call escrowed and have to be freely available to trade,” HLB Mann Judd Perth partner Marcus Ohm said.

“The theory is there should be more retail participation because of those requirements.

“It was getting quite hard for some IPOs previously [to attract retail money] because of the institutional participation.”

Ohm added the HLB Mann Judd “IPO Watch Australia” report indicated 2017 would be a stronger year for new company floats.

“A couple of weeks ago there were 23 companies looking to list at that particular point in time and that’s 15 per cent up on 2015,” he said.

The IPO pipeline looked to be confirming the resurgence of the materials sector, he said, with 11 of the 23 companies looking to be floated from that market segment.

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