Managers, investors evolve in west

The state’s first early stage venture capital limited partnership is one of three funds announced by Western Australian money managers this year, and one of two in a joint project by Cottesloe-based View Street Partners and Nedlands-based Mac Equity.

The 6009 Venture will be a $15 million fund targeting innovative, unlisted Australian businesses with high growth potential, while a sister fund, 6009 Capital, will have a broader remit, including small cap equities.

The 6009 Capital fund is also intended to carry about $15 million.

It follows a move in March by West Perth-based fund manager NWQ, which announced a new fiduciary fund vehicle targeted at investors in the US, attracting cash for Australia’s emerging hedge equity managers.

View Street Partners co-founder Tim Andrew told Business News the boutique corporate finance firm had led a number of raisings in the past couple of years for companies suited to a fund of this type, among them Augusta-based Ocean Grown Abalone.

Mr Andrew said there was plenty of entrepreneurial spirit in WA outside of the resources sector, with the new vehicles to be focused both on startups and other high-growth opportunities.

“Something like Ocean Grown, for example, has been going for 12 years,” he said.

“After all that blood, sweat and tears, and innovation, it had finally gotten to a point where it could explode commercially and there’s a real avenue to grow.

“The only thing stopping it from growing (was a lack of) capital and advice.”

The funds would have a strong determination to contribute more than just raising money for investees, additionally helping with strategy and governance in a long term relationship, Mr Andrew said.

There are about 31 early stage venture capital partnerships registered nationally, with 6009 to be the first in WA if it attracts enough capital to reach the required minimum investment threshold of $10 million.

Another WA fund manager, Bentley-based Yuuwa Capital, has registered a venture capital limited partnership, which is a similar concept although governed by different, somewhat looser, restrictions.

ESVC partnerships operate under a special structure that provides beneficial tax treatment to encourage investment in growth companies.

“Any capital and income gains made from investments in the partnership are 100 per cent tax free,” Mr Andrew said.

Evolving

Speaking to Business News after the new vehicle targeting US clients was launched, NWQ executive chairman Jonathan Horton said there was an $800 billion market in that country for funds that distributed to other hedge funds, which was NWQ’s specialty.

He said another fund was being developed targeting Australia’s east coast.

Perth investors were evolving, Mr Horton said, with a noticeable number of family offices making a serious attempt to professionalise in the past five years.

One notable trend was increased interest in sophisticated, liquid assets, rather than just investments in property, venture capital and businesses.

That was happening slowly, however.

Mr Horton said portfolios in WA were often much less liquid than other places in the world, partly because of the country’s economic strength.

“We haven’t had a recession in such a long period of time and so much money has been made from such little amounts of money, in starting new businesses, in funding relatively aggressively speculative stuff as well,” he said.

“And by the way, that’s done really’ really well.

“Our proposition of steady 500 basis points (above inflation), liquid, is kind of boring and sometimes hard to embrace.

“If we were to go into recession in Australia ... investments like ours would look really good.”

Mr Horton said retail investors, often based on the east coast, had begun taking interest in models alternative to traditional balanced funds, but managers had to be tax aware, liquid, and fee sensitive.