After more than a year of research and development, Acorn Capital has finally launched its new microcap equity fund targeting the unlisted market, raising $135 million from two large institutional investors.

Portfolio manager Douglas Loh said Acorn had the ability to increase the size of the fund, which was launched in mid-February, to $200 million.

Acorn initially struggled to launch the fund in the face
of adverse equity market movements, despite interest from a number of
institutional clients. Loh
would not disclose which institutions
had invested in the fund, which is called the Microcap Investment Trust.

Adopting a similar strategy to its existing
listed microcap fund, Loh said Acorn would take a portfolio approach to
investing in the unlisted microcap sector. 

“During the initial construction phase, the
portfolio will be invested across both listed and unlisted microcaps on a
sector neutral basis with sector weights referenced to the sector weights of
the Acorn Capital/
AGSM Microcap
Index,” he said. 

“As unlisted microcap investment
opportunities emerge that are relatively more attractive on a risk-adjusted
basis than their comparable listed peers, these will be inserted into the
portfolio replacing their listed counterparts.”

The investment strategy is designed to seek
the most attractive microcap opportunities within each economic sector
irrespective of whether they are listed or unlisted.

Loh said the venture into the unlisted sector would significantly expand Acorn’s investable universe, with the unlisted microcap sector five times larger than the listed microcap sector.

When Acorn was set up, the firm took the
view that it could not effectively manage more than 1 to 2 per cent of the
listed microcap universe.  It is
currently managing around 0.8 per cent.

When fully constructed, the portfolio is
expected to contain 40 to 60 investments with approximately 60 per cent
invested in unlisted microcaps and the balance in listed microcaps, to provide
liquidity and diversification.

Acorn Capital is 50 per cent owned by Australian Unity.

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