Sean Yap, CEO of M&A Value Partners Asset Management
PETALING JAYA: A new fund that aims to invest in initial public offerings (IPOs), which is backed by a bank handling most ACE Market listings, is likely to get traction among investors.
M&A Value Partners IPO Equity Fund, launched last week, lays claim to being Malaysia’s first wholesale IPO-focused fund, with a targeted 13% return a year.
Considering the fund will largely invest in IPOs and the fact that M&A Securities Sdn Bhd has a significant market share of advisory roles of listings on the ACE Market over the last few years, puts the new fund in a unique position.
Many ACE Market listings have performed well.
Sean Yap, the chief executive officer of M&A Value Partners Asset Management explained that the 13% targeted return is based on the simple average of all Bursa Malaysia IPOs total returns since 2020.
“The fund provides indirect access to IPO pipeline deals, capitalising on the high liquidity flows into primary deals on Bursa Malaysia,” Yap said.
“IPOs have outperformed by a wide margin of more than 66% versus the benchmark FBMKLCI since 2020. And as the high liquidity flows go, our research shows that in the top 10 IPOs since 2020, the retail portion has on average been oversubscribed by a massive 42 times. Our fund now gives you the opportunity to tap into the IPO market which you wouldn’t normally get to be part of,” he added.
Yap said the fund seeks to provide investors indirect access to primary offerings on Bursa Malaysia.
One question posed by a fund manager is how long will this fund hold on to the IPO shares that it invests in and how will the fund manage the situation of the need to invest more capital into new IPOs.
Will that mean that the fund will have to seek new investors into the fund in order to subscribe to new IPOs?
Yap said the fund’s decision to crystallise profits will be assessed on a case-to-case basis without any specific holding period.
“Typically when we initiate a position, we would require at least a 50% upside from our investment cost. If we see longer-term upside potential, we will hold it for the longer term. This is an open ended wholesale fund, investors can invest at any time and also withdraw at any time without a lock in period.
“Most IPOs are spread out in terms of their launches, we do not need any additional capital whenever there is an IPO in the market, and furthermore we limit our exposure to a single IPO at most, to 20% of the total fund size, as part of our risk management strategy.”
On other strategic aspects of the fund, Yap explained that the portfolio will be “concentrated” and will comprise not more than 20 securities.
“The fund will also invest in securities which are undervalued and mispriced due to market inefficiencies. We will adopt a careful discretionary value investing approach in selecting high growth securities and uncovering opportunities in this segment,” Yap added.
He also said the fund will reduce “cash drag” whenever possible and hopes to invest close to 90% of net asset value at all times.
“The fund may also invest in other asset classes depending on the prevailing market conditions. These asset classes would range from money market instruments and deposits and pre-IPO deals.”
M&A Value Partners Asset Management is 75% owned by M&A Equity Holdings Bhd
, which wholly owns M&A Securities Sdn Bhd, and 25% by Value Partners Ltd (HK).
When asked if this fund will get any favourable allocations of IPOs that M&A Securities conducts, Yap explained: “We are an asset-management company, we apply and subscribe for IPO shares just like any other institutional fund.
IPO allocation is determined, recommended and determined with the appointed placement agent and issuer of the IPO. We only set policies on our investment guidelines and procedures and in accordance with the registered fund’s mandate”.
“We are excited to introduce this new fund, which reflects our commitment to providing innovative and high-growth investment opportunities to wider investment audience. The wholesale fund is truly a first in Malaysia, an IPO-focused fund with performance fee embedded,” Yap added.
