(Pictured: Andrew Barnes)
By Greg Bright*
Australasian Wealth Investments (AWI) last week transformed itself from an LIC – it started life as the Fat Prophets listed vehicle – into a traditional listed company after shareholders voted to remove the management company.
As previously announced, most of the former investment portfolio has been cleaned out, allowing the new management to concentrate on a small range of financial services businesses, the largest investments to date being a 49 per cent interest in van Eyk Research and its multi-manager funds known as Blueprint, and Perpetual New Zealand.
The main difference between the new structure and the LIC is that it gives all shareholders the same power according to their holdings, rather than having a management company calling the shots off at the side. The sharemarket should like this. In fact, the sharemarket already likes the story, with the company raising $10 million in a private placement at 35c in August and then another $14.1 million in a rights issue at the same price in October. The last sale price last week was 49c.
The story which has moved the market is that the company (with the annoying stock code AWK) is not looking to do a standard roll-up of various financial services businesses and then aim to reduce costs through aggregation. The new chairman, Andrew Barnes, and chief executive, Ben Heap, gave a post-shareholder meeting briefing last week in which they provided more detail about their strategy.
The core themes are digital distribution to the SMSF market, using research as a complement, a funds management platform (Blueprint) and some unspecified trustee and super services. The digital distribution part is InvestSmart, acquired from Fairfax for $7 million in July. The key here is that it is run by Ron Hodge, who started the business in the dot-com boom and later sold it to Fairfax. He decided to buy it back because the media company was “not looking after my baby”, he says.
In their presentation, Barnes and Heap said that AWI would own up to 100 per cent of a small number of distinct businesses. They would like to buy a majority of van Eyk in time, which has several other shareholders, the largest of which is interests associated with Mark Thomas, the chief executive, who has been with the research firm for more than 20 years.
They also want to back a range of start-ups in the financial services space and will form a new company or business unit, AWI Ventures, in the new year. This will invest small amounts – up to $100,000 each – in about 10 start-ups over the next 12-18 months. The managers describe this as “outsourcing their R&D” by providing a future pipeline of innovations. It is based on a US venture model from a company called ‘Y Combinator’, which takes a large number of very small bets on start-ups each year.
AWI already has a small investment in SelfWealth, which is aiming to build a community of SMSF trustees and their advisors and includes the novel “crowd-sourced” equity portfolio construction.
The wisdom of crowds is an established psychological phenomenon whereby, somehow, the median views of a large number of people will often be more accurate than the single views even of experts. Whether this works with investments is unclear given the commonly held view that investors will usually be better off betting against the herd. Subscribers to SelfWealth are able to compare their portfolios with those of their peers and communicate with each other.
*Greg Bright, the editor, is also an independent director of Pyne Gould Corporation, which currently retains a minority economic interest in van Eyk and was the previous owner of Perpetual NZ.