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.
What’s better than a unicorn?
The stellar run in the Nasdaq 100 index, which has seen it reach new all-time highs some 40 times already in 2020, shows no signs of slowing. With such strength and a willingness of investors to look beyond short-term losses, a single-file, socially distanced line of “unicorns” is awaiting their piece of the action. The last week has seen three well-known names file for upcoming IPOs:
- Asana – A workplace productivity app, not unlike a shared to-do list and planning platform, it has filed for a direct listing, meaning the company is not seeking fresh capital. The company is led by one of Facebook’s co-founders, and according to Pitchbook, it has been trading on a US$5 billion valuation in private fund circles. The company has reported having about 75,000 paying customers in 2020, boasting revenue growth of 70% to US$47 million for the quarter, but seeing losses rack up at a rate of US$36 million.
- Snowflake – The uniquely named cloud data company will be seeking a traditional IPO after revealing its losses hit US$350 million for the year ended in January, doubling on the prior year. Importantly, though, revenue growth exceeds 170%, at US$264 million, with some 3,117 total customers for the ‘data warehousing’ company. The company was valued at US$12 billion prior to its latest funding round.
- Unity Software – Likely one of the more enticing opportunities is this video game development platform, run by the former CEO of Electronic Arts. According to reports, the companies software is behind more than half of the top 1,000 games on the Apple and Google App Stores, having been made on their platform. Again, a recurring theme, the company lost US$54 million on US$351 million in revenue for the first half of 2020, a slight improvement on 2019’s loss of US$67 million.
So, back to the question, what’s better than a unicorn?
An ANT!
Ant Financial has been dubbed as the most valuable “fintech” company in the world, potentially becoming the largest listing in history, at over US$200 billion. The group owns the ubiquitous AliPay app which processed US$17 trillion (yes, trillion) of transactions in 2019 and is 33% owned by Jack Ma’s Alibaba Inc. Interestingly, payments only accounted for 36% of its revenue in 2019, down from 50% just two years ago. The group has more than 711 million active users, but remains almost solely operational in China.
The group offers services ranging from asset management and money-market funds, where it has US$173 billion under management, to consumer lending (US$290 billion), online payments and insurance for 107 million people. An IPO would see it become bigger than the Royal Bank of Canada, Citigroup and just behind the Bank of America in terms of market cap. And one of the most pertinent points, it made a US$1.3 billion profit in the March 2020 quarter alone.
