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Co-investment opportunity as NAOS goes private

Niche small-and-micro-cap Australian equities asset manager NAOS Asset Management has launched a unique investment fund that focuses on private businesses in Australia. The fund is headed up by Sebastian Evans, also chief investment officer and managing director of the firm.

Why private businesses?

NAOS has shifted its focus onto the private sector after successful listed equity strategies because it believes that the pool of companies and number of investment opportunities are far greater than that of the public market, but also, growing more quickly.

This often means the quality of businesses compared to listed peers is far better, with aligned management and lower levels of investor participation. Private businesses aren’t exposed to the complexities of an open market; they have far greater flexibility, room to grow exponentially and decisions are made with a long-term focus rather than short-term shareholder profitability.

The fund will invest in up to 20 companies that have a competitive advantage, strong track record, and long-term growth potential. In a unique approach more akin to institutional private equity and venture capital strategy, NAOS will offer investors the rare opportunity to ‘co-invest’ alongside the fund, in the best ideas it finds.

“Based on the feedback from our current suite of investors across three ASX-listed investment companies, there is an appetite for direct investing in outstanding founder-led unlisted companies,” says Evans. “Where an appropriate opportunity arises, investors in the NAOS Private Opportunities Fund may be offered the ability to directly co-invest in businesses that the fund is invested in.”

The key investment considerations for companies in the fund:

  • Proven business models with established revenue profiles in excess of $5 million a year
  • Industry and structural tailwinds
  • Are the founders aligned and is their business culture aligned with our own values?
  • Does the company have a competitive advantage that is sustainable over time and will this “moat” continue to increase over time?
  • Does the investment align with our ESG policy?

The company will “source investment opportunities and generate investment ideas through its existing network of industry contacts, its proprietary lead generation database and also leveraging off its investment advisory board, comprising four business leaders drawn from a range of sectors. NAOS has already identified several companies as likely investments in the fund including in the B2B finance sector and the sports leisurewear sector.”

NAOS is looking to raise up to $35 million and is open to sophisticated and wholesale investors with a minimum subscription of $100,000. The offer is scheduled to close at the end of this month.

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