Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Fintech continues to move into the mainstream
Australia’s leading micro-investing app, Raiz, is not so micro, having finally busted through the $1 billion funds under management mark. Last week, Raiz (ASX: RZI) delivered its quarterly (December 2021) numbers, which had some gleaming highlights. The company reported total revenue up 82.9 per cent year-on-year, which was a huge increase to $4.5 million in the quarter. Australian funds under management (FUM) surged 70.8% YOY to over $1 billion, with global active customers rising 73.2 per cent to 594,992. The platform’s superannuation FUM was up 136 per cent, YOY, to $191.2 million.
But the biggest news of the day was the announcement of Australian media giant Seven West Media (ASX: SWM) taking a strategic investment of 6.6 per cent in Raiz, for $10 million, to accelerate the company’s growth. The micro-investing platform, on which customers invest their spare change from everyday purchases into a diversified portfolio of shares and other assets, will work with Seven West Media to take advantage of its huge audience, via advertising, to grow its client base.
Raiz says this move will allow it to scale-up significantly.
Raiz joint group CEO Brendan Malone said, “This investment by Seven into the Raiz business is a strong endorsement of Raiz’s business model and management’s ability to execute. After extensive discussions with Seven, we have concluded that its media assets and reach are an excellent means to promote Raiz’s products and services to achieve the accelerated growth we require.”
Another highlight was the growth in active customers Raiz recorded in its Indonesian business. Numbers were up 202.3 per cent to 200,000, well above the company target. Numbers in Malaysia were up 155.7 per cent but slightly lower than expected. The move into Southeast Asia is accelerating, even though cultural difficulties can make things difficult. Here are a few dot points on from the Quarterly:
- Raiz’s annual recurring revenue (ARR) run rate up 91.1% YOY to $14.5 million
- Raiz group remained operating cash flow positive in Q2 FY22, the third quarter in a row
- Raiz’s Australian business has been operating cashflow-positive for nine consecutive quarters
- Raiz held cash, cash equivalents and term deposits totalling $20.5 million As of 31 December 2021
The distinguishing feature of micro-investing is that it simplifies investing by rounding-up purchases made by a client to the nearest dollar So, for example, if you buy a can of Coke for $4.50, the extra 50 cents will be invested into your Raiz Invest account.
According to equity capital markets firm MF & Co, assets under management by “robo” advisers are forecast to grow by 863% globally, from US$2.3 billion in 2019 to US$22.97 billion by 2024. The continued growth and scaling-up ability conferred by SWM’s strategic 6.6% stake makes RZI an attractive buy, in our view.
