Over the September quarter, we continued to deploy capital into new private equity strategies for the WAM Alternative Assets (ASX: WMA) investment portfolio. These are attractive growth strategies which we believe are likely to deliver strong excess returns. For details, please read our September investment update here.
Historically, the best performing private equity investments are those made during periods of economic uncertainty or downturn, where there are more opportunities to invest at attractive valuations. These conditions often lead to more public-to-private transactions, where publicly listed companies are de-listed and acquired by private equity firms. With the tighter macroeconomic environment, we can expect that there will be an increased deal flow for private equity investors focusing on transformation and turnaround. As a result, we anticipate that the private equity allocation within the WAM Alternative Assets investment portfolio will grow substantially and become a significant driver of investment portfolio performance over time.
During this period, we further diversified the portfolio by investing in intellectual property and trademark services through private equity investment partner, Adamantem Capital and committed capital to a new investment partner, real estate specialist Wentworth Capital. Over the last 18 months, we have steadily increased the investment portfolio’s exposure to private equity strategies from 16.5% at 31 March 2023, to 20.6% exposure at 30 September 2024. The investment portfolio also includes 17.3% of uncalled capital commitments to private equity strategies at 30 September 2024, which we expect to be deployed progressively over the next few years.
WAM Alternate Assets’ asset class exposure at 30 September 2024
Despite the challenging environment for private markets in FY2024, we believe a more optimistic Australian monetary outlook should positively affect the value of the existing private businesses within our portfolio. This should see more favourable investment exits from the investment portfolio over the medium term and in turn, deliver outsized returns for shareholders. We encourage you to read the WAM Alternative Assets Full Year 2024 Results announcement for more detail.
Wilson Asset Management Chairman and Chief Investment Officer Geoff Wilson AO has been taking advantage of the significant buying opportunity that WAM Alternative Assets currently presents and has been increasing his holding over the last few weeks.
I look forward to sharing more insights with you in the months to come. Keep an eye out for our upcoming video content series with several of WAM Alternative Assets’ investment partners.
Spotlight on QANTM Intellectual Property Limited (QANTM IP)
We are excited to provide WAM Alternative Assets shareholders with exposure to intellectual property and trademark services provider, QANTM IP through our investment partner, Adamantem Capital. QANTM IP was acquired by Adamantem Capital in September 2024 and is Australia’s second largest provider of patent and trademark filing, renewal and protection legal services.
The company is poised to benefit from tailwinds in global innovation, as developments in product, brand and research continue to scale, the demand for strong intellectual property protection and management services is expected to rise. QANTM IP has approximately 5,000 Australian and international clients, ranging from start-up technology businesses to Fortune 500 multinationals, public research institutions and universities. The business’ largest accounts have a tenure of more than 10 years, with patents generating multi-year revenue streams.
By investing in QANTM IP, the team and I are positioning the WAM Alternative Assets investment portfolio to benefit from the increasing complexity and value of intellectual property assets, with the potential to deliver outsized returns for shareholders as Australia’s intellectual property landscape expands and evolves. This is an example of another high-quality private business within the investment portfolio that is underpinned by tailwinds and supported by an experienced private equity firm.
Investing in private equity real estate
In August 2024, WAM Alternative Assets announced a new investment partner and committed $15 million to the Wentworth Capital Real Estate Private Equity Fund I (the Fund). Founded in 2019, Wentworth Capital is a respected Australian institutional real estate private equity firm, with an experienced investment management team and $1.5 billion of assets under management. The Fund acquires high quality Australian real estate assets and executes bespoke asset turnaround strategies to create a diversified, high-returning investment portfolio.
The Fund is a continuation of Wentworth’s opportunistic investment thesis and is well positioned to execute the investment strategy in the current economic environment. The WAM Alternative Assets investment team values the Fund’s opportunistic strategy, which aims to deliver comparable returns and holding periods equivalent to those of private equity.
