Market volatility has scuttled plans by Australian equities manager, Firetrail, to list a long-short fund on the ASX.
Firetrail was seeking up to A$305 million from NZ and Australian investors for a listed version of the group’s Absolute Return Fund.
The Firetrail fund was on offer in NZ under the trans-Tasman mutual recognition regime.
In a statement last week, Patrick Hodgens, Firetrail managing director, said the firm decided to pull the plug on the IPO despite hitting the minimum target of A$73.5 million.
The Firetrail capital-raise period coincided with the worst bout of market volatility for some time last week, which saw global indices plunge more than 4 per cent over a few days.
“Our view is that the increased volatility in equity markets over the past week combined with a number of large LIC raisings this year have had an impact on the broader LIC market,” Hodgens said in the release. “As a result, we do not believe there will be enough demand in the final week of the raise to appropriately diversify the shareholder base for the company.”
He said the Firetrail LIC would have been subject to ownership “concentration risk” without a broader share register.
Investors could still access the Firetrail Absolute Return strategy through the unlisted Australian unit trust vehicle, Hodgens said.
Firetrail, part of the ASX-listed Pinnacle Investment Management stable of ‘affiliate’ boutique fund firms, emerged out of the Macquarie Australian equities team last year.
While the Australian LIC market has seen a flurry of listings over the year-to-date it has been dwarfed by the number of exchange-traded funds (ETFs) available on the ASX.
Currently, the ASX harbours 241 exchange-traded products (mostly ETFs) compared to 110 LICs.
And for the first time, the capital value of ASX-listed ETFs has jumped ahead of LICs. According to Australian ETF provider, Betashares, the ASX ETF market hit a high of almost A$42.3 billion at the end of September compared to the A$42.23 billion held via LICs.
In a release, BetaShares CEO, Alex Vynokur: “This is a significant new benchmark for the ETF industry, especially given the relatively short amount of time since ETFs have been available on the ASX versus LICs.”
The first LIC listed on the ASX in 1936 giving the market a 65-year headstart on ETFs, which first arrived in Australia in 2001.