Asset Management

Arowana’s asset management business was initially established in 2007 with the launch of its inaugural fund, the Arowana Capital Australasian MicroCap PE Fund 1 (AMPEF 1). This inaugural fund was one of only a minority of 2007 vintage funds globally that were able to successfully navigate the global financial crisis (GFC) and deliver a top quartile return. Following the successful realisation of this fund in June 2013, Arowana proceeded to formalise the establishment of a specialist asset management business. Between July 2014 and December 2014, it launched two new funds, being the Arowana Australasian Special Situations Fund (AASSF 1) and the Arowana Australasian Value Opportunities Fund (AAVOF), which is now publicly listed and known as the Arowana Contrarian Value Fund (ACVF).

As a Certified B Corporation, the asset management business is committed to operating and investing in accordance with the B Corp principles and fundamentally believes that sustainable investing is not mutually exclusive with superior returns.

Private Funds

Fund I: Arowana Capital MicroCap PE Fund 1 (AMPEF 1)

Launched in 2007, AMPEF I was established to provide succession capital to SME companies in Australia, New Zealand and South East Asia. Within 2 months of first close in June 2007, the Arowana general partnership started to get very concerned about the world financial and economic outlook following the collapse of two Bear Stearns funds in the United States in July 2007. Furthermore, it was concerned about some of the prices being paid for SME businesses in Australia and the limited due diligence that was being conducted by its peers. As a result, the Arowana general partnership decided to hold off on any investments. It did not start deploying the majority of its committed capital until after the Lehman Brothers collapse in September 2008. This decision helped underpin the strong investment results of this fund, which was realised in full in June 2013.

Fund II: Arowana Australasian Special Situations Fund (AASSF)

Established in 2014, the AASSF is an unlisted wholesale fund. The fund is currently in harvest and therefore closed to new investments. It was established to enable investors to take advantage of significant opportunities providing alternative funding to SME and growth enterprises that are unable to obtain conventional financing. These investments can be structured to limit downside, deliver favourable risk asymmetry and achieve IRRs in excess of 20% (incorporating annualised yields in excess of 8%). The AASSF vehicle invested in non-controlling stakes in SME and growth companies with business interests in Australia, New Zealand and Asia that require investment capital for growth and/or a special situation but are unable to secure it from conventional sources. It does so by investing through structured securities that typically have both debt and equity features.

Fund III: Australian Special Income Opportunities Fund (ASIOF)

Launched in 2018, the ASIOF wholesale trust was established to fund an increasing unmet debt financing need amongst Australian SME and growth companies and to provide our co-investors with an opportunity to be part of the solution and earn an attractive income based yield and capital return.

Public Fund

Arowana Contrarian Value Fund

Managed by Arowana, the Contrarian Value Fund (CVF) was a listed investment company that commenced trading on the ASX in January 2015. CVF’s investment mandate was to identify materially mis-priced securities that provided positive risk asymmetry using data driven fundamental analysis combined with machine learning algorithmic analytics.

CVF was formerly known as the Australasian Value Opportunities Fund (AVOF), which was established as an unlisted fund in 2009. From 1 July 2009 through 30 September 2014, AVOF produced an annualised net return of 18.4% (without any leverage) compared to the S&P/ASX 200 return of 10.5%, beating the index by nearly 8% per annum. It was this track record that led to investor appetite for an LIC version of the fund.

As we reflect on our journey at the 10 year anniversary mark, we came to the realisation that a contrarian value style and being listed on a stock exchange are diametrically incompatible, especially in a heavily momentum biased market. A contrarian value style tends to take a number of years to pay off and does so in a non-linear manner which runs counter to the listed market’s more short-term focus.

In December 2020, after an extensive strategic review it was recommended by the Independent Board of CVF to liquidate the portfolio and return capital to shareholders, with Arowana retiring as the manager of the CVF following the payment of a termination fee. Since its IPO until the liquidation, CVF has delivered annualised net returns of 8.6% compared to the S&P/ASX 200 return of 7.7% for an out-performance of 0.9%. (excluding costs associated with the liquidation, annualised performance was 8.9%, for an out-performance of 1.2%).

This was achieved whilst putting significantly less investor capital at risk than many of our peers. Since its inception, CVF has held on average approximately 53% of its investable assets in cash. Adjusted for this average cash holding, the outperformance is greater, with an annualised performance of 18.2%. CVF was also able to deliver an average grossed up dividend yield of 5.7% per annum over the period that CVF was listed.

Further information on CVF’s track record can be found here.