Wealth management firm L1 Capital today opened the initial public offering (IPO) for its new listed investment company (LIC), the L1 Long Short Fund Limited.
The LIC will offer access to the same strategy employed by the L1 Capital Long Short Fund, an absolute return managed fund launched in September 2014, which has delivered a yearly return of 36.9 per cent since inception but is now closed to new investors.
The new LIC will predominantly invest in equities listed on the Australian and New Zealand exchanges, but has the ability to allocate up to 30 per cent of its portfolio to global securities.
The number of positions held in the portfolio will be between 50 and 100 at any one time, with a maximum gross market exposure of 300 per cent and a maximum net exposure of 150 per cent.
Investors will be charged a management fee of 1.4 per cent (plus GST) and a performance fee of 20 per cent (plus GST) determined by a high watermark.
Seed Partnerships founder Chris Donohoe pointed out investors in the L1 Long Short Fund Limited could look forward to the friendliest LIC terms ever put together.
“If you put in $2, you get a $2 portfolio plus the broker’s fees are paid for. There is no dilutive option, so that option’s really clean,” Donohoe said.
“The manager will also cover basically all of the ongoing costs except those that are inappropriate to pay for like independent directors’ costs and insurances.”
He added the alignment of interests between the investment team and its clients was exceptional.
“With the performance fees paid, L1 pays tax and they invest those performance fees into the listed investment company,” he said.
“Also the investment team [has subjected its investment to] voluntary escrow for 10 years and they are putting $10 million-plus into the LIC as an investment team.”
He said he expected inflows for the fund to come evenly from both stockbrokers and financial planners.
From a client perspective, L1 Capital joint managing director Mark Landau predicted a significant amount of interest will come from the SMSF sector.
“We soft closed the L1 Capital Long Short Fund back in November and a lot of the existing client base was SMSF investors and high net worth individuals, so effectively there is some pent-up demand from [those groups] of people that want to invest [in the strategy] but haven’t been able to come in,” he noted.
The IPO opened today with the broker firm offer expected to close on 29 March and the general offer expected to close on 6 April. The offer price is $2 and 24 April is the date the shares will begin trading on the Australian Securities Exchange.
L1 Capital is looking to raise $500 million through the IPO and the minimum capital target of $100 million has already been reached.