Geoff Wilson might have just raised the biggest whack of capital in Wilson Asset Management’s history, but the veteran fund manager wants his investors to know that he won’t rush to put it to work.
WAM will announce on Monday that the IPO of its first international equities listed investment company, WAM Global, has closed after raising $466 million.
The oversubscribed raising is the biggest in the history of WAM’s stable of funds, eclipsing the $392 million raised for its first large stock company, WAM Leaders.
The firm had been targeting a $330 million raising for the WAM Global LIC. Almost 8000 of the investors in 13,000 WAM Global were existing shareholders in LICs across the WAM stable.
After closing a big raising for his new global fund, Wilson says he’s staying cautious on the outlook for markets.
Wilson said from New York that he was thrilled with the response from investors, who had been asking for WAM to venture into global equities for the past 10 years.
WAM Global will start investing in the next week or so, led by lead portfolio manger Catriona Burns.
But while Wilson emphasises WAM Global’s capital pile is relatively small in the world of offshore investing, his team will be in no rush to put the whole pile to work; around 25 per cent to 30 per cent will be held in cash, and perhaps even more.
This is wariness is driven by two things.
WAM would love to be buying undervalued growth stocks in a more volatile market, where opportunities can become cheaper.
In addition, Wilson points out that the grand narrative of synchronised global growth has fractured a little since the start of the year, with ructions in Italy and some weaker-than-expected data from other parts of Europe creating some nerves.
While Wilson says the mood in the US remains very upbeat – except for all the businesspeople who he says start their conversations apologising for President Donald Trump – he does have concern that the White House’s tax cuts have effectively brought earnings growth forward by a year or so.
With this in mind, WAM Global will factor into its investment decisions a view on how the US economy and the broader market might be performing in a couple of years.
“Obviously it’s very important that we are buying at the right time and buying when we can see a catalyst that’s going to change a company’s valuation,” Wilson says.
“But the exceptional opportunities come with significant dislocation. We are having minor dislocation, but we are still very wary of the market.”
In Australia there around 2500 listed stocks; in the US the number has fallen from around 8000 to 4300 in recent years – something that Warren Buffett and JP Morgan’s Jamie Dimon argue is due to the short-term focus of US markets, which they claim has “discouraged companies with a longer-term view from going public at all”.
Wilson says the remaining universe can be filtered pretty quickly to find the undervalued small and mid-sized companies WAM Global will focus on – certainly don’t expect them to be buying any FAANG stocks.
The firm’s four key filters – earnings growth, valuation, industry position and management – will be used by WAM Global, with Wilson putting an accent on the latter in a time when the royal commission has reminded him of the “decay of moral values” in business.