Thursday 4 March 2021

Invested in Microequities Value Income Fund

I've been receiving regular promotional emails from Microequities Asset Management since 2017 when I first responded to an ad about this fund manager via Morningstar. I decided to take another look at their fund offerings, as I was willing to put $10-$20K into one of their funds as small, value equities can often perform well compared to the overall market index, but it is a lot of work to research and select potential winners (so I wouldn't try to pick individual stocks myself).

I found out (again) that their funds are 'wholesale' and normally only available to 'professional' investors with a minimum investment of $100K. Probably why I didn't invest back in 2017!

However, after abandoning my online application when I came to the minimum investment requirement, I was contacted by one of their relationship managers who advised that they had recently started up a new retail fund with a $20K minimum initial investment. So I decided to invest the minimum amount into their retail 'Value Income Fund' via my portfolio loan.

Being a small, boutique fund manager they charge a quite hefty fee of 1.3% PLUS a 'performance fee' of 20.5% of any return above the benchmark S&P/ASX Emerging Company Accumulation Index. There is also a potential liquidity issue, as the PDS notes that redemptions may be suspended or delayed if market conditions result in redemption requests of more than 5%-10% of the fund in one day.

Overall this is a fairly costly and high risk investment, so I wouldn't risk a large fraction of my portfolio on this investment. But $20K is only 0.72% of my NW, so I can afford to make a modest allocation to this investment. The retail fund has only been operating since Feb 2019, so it doesn't have much historic performance data, but it is expected to follow a similar strategy to their wholesale high income value fund, which has averaged a compound rate of return of 11.41% since 2012. As long as the average return is above the interest rate charged on my portfolio loan (currently 4.98% pa) I will do OK. We'll see how things turn out over the next 5-10 years.

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