The boutique launched by former Macquarie stock pickers under Pinnacle's banner in May is set to kick off an initial public offer, raising up to $304.5 million for an absolute return LIC.
Firetrail Investments lodged a prospectus with ASIC on Tuesday for its listed investment company, to be called Firetrail Absolute Return Limited.
The IPO follows successful capital raising by the manager. It expects to have $2 billion by the end of September - double its previous estimates.
The offer is priced at $2.10 per share for 145,000,000 shares, with room to accept $73.5 million in oversubscriptions. The manager has set the minimum subscription for the offer at $73.5 million.
The general offer is expected to open on September 24 and will run for about three weeks, closing on October 25. The LIC expects to start trading on October 31 under the ticker code FTA.
Former Macquarie managers
Firetrail Investments set up shop at Ian Macoun's multi-affiliate Pinnacle Investment Management in May. The boutique's investment team is led by Patrick Hodgens, Blake Henricks and James Miller, who ran Maquarie's market neutral fund.
The investment team and their associates will take up at least 500,000 shares ($1 million of the $304.5 million IPO) when the offer is completed.
The LIC's investment portfolio will be predominately comprised of long and short positions in Australian listed securities, aiming to deliver above the RBA cash rate in positive risk adjusted returns despite the performance of underlying securities.
Firetrail's Absolute Return has delivered 0.88% above the benchmark, hitting 1.60% in returns from March 14 to September 6.
Of the $2 billion it is now expecting to raise by September end, nearly $250 million was raised through unit trusts which Firetrail deputy portfolio manager Blake Henricks previously told Financial Standard essentially acted as "IPO proxies".
At the time, Henricks said the boutique expects to break even this year, contingent on IPO whose plans had not been finalised then.
Now trending: LICs
Firetrail's IPO follow a trend in the funds management industry to launch LICs as managers eye retail money, which can be higher-fee generating as well as stickier than institutional money.
Biggest LIC IPOs so far this year have included: L1 Capital's $1.3 billion IPO, Wilson Asset Management's $466 million for WAM Global. Brisbane-based Gryphon Capital Investment's Gryphon Capital Income Trust's $175 million, Tribeca's $250 million infrastructure LIC and Cadence's $250 million LIC.
By these numbers, Firetrail's $304.5 million IPO could sit among the top IPOs in Australia, depending on further launches and the capital raised.
Last week, a leading IPO specialist said adviser participation in the IPOs of listed investment companies has jumped by nearly 30% since July last year.
SeedPartnerships director Chris Clayton says until last year about 80% of LIC floats were taken up by brokers while 20% participation came from financial advisers and planners.
However, the broker-adviser split is now roughly 50-50, Clayton said at the recent Financial Standard ETF Forum in Sydney - after managers started to take up the costs of the IPO instead of passing them on to the investors.
For Firetrail's offer CommSec is acting as the lead arranger and joint lead manager while Wilsons, Ord Minnett, Taylor Collison and Morgans are acting as joint lead managers.
Crestone, Bell Porter, Patersons and FinEx Wealth are acting as co-managers.
The boutique will pay $9.4 million in expenses to joint lead managers, legal, investigating accountant, ASX, ASIC for lodgement and others, for the $304.5 million offer.
Firetrail deputy portfolio manager Blake Henricks spoke to Financial Standard as a part of our annual boutiques feature, out 17 September, 2018.
Updated at 9:15am.