The Creative IPO Fund closed its third year of operation in 2015.
Looking back at its genesis, the original goal was to create a Mutual Fund exclusively dedicated to what most would consider a “members-only” type of investment restricted to institutional investors and other huge players. The objective was to demonstrate that, with hard work and a deep knowledge of the underwriting process, a significant amount of IPO allocations could be sourced on a regular basis throughout the year, and that a highly profitable financial product could be built around this premise.
The key strategy implemented during these last three years is to sell the stock on the first day of trading, with no exception. The temptation to hold the stock for a week, or even a month, is often high. Conversely, we now and then err on the side of caution and precipitously jump off at a lower price than the next opening day price. But we’ve come to realize that after the first day, sometimes after the first hour, we consider it someone else’s game.
The plan was also to be active in the three biggest financial markets of the world: US, Europe and Asia. Even with this effort being very time and energy consuming, we bet on this course of action giving us access to more deals, and mitigating the risk of regional turmoil around the globe. So far it has played out exactly as we hoped.
At the inception of the Fund we also had in mind a new type of relationship between investors and the Fund’s management team. We did not want to replicate the typically frustrating systems implemented by many financial institutions, stemming from the lack of quality information delivered to investors. And we also believed the flow of information should not be limited to quarterly reports with encrypted data. Since the IPO ecosystem is exciting, and IPOs often make for some of the more interesting financial media storylines, we happily strive to keep investors in the loop with monthly letters and monthly Net Asset Value reports. We’ve even set up a Twitter account for breaking news!
Our Fund is also unique because IPOs are a scarce commodity compared to other widely available securities. Indeed, growing the size of assets under management gives us access to more deals, as it allows us to work with additional underwriters while giving us better leverage with our current ones. But there are two sides to every coin: it could also drastically affect the Fund’s Return on Investment if it is not closely monitored. We therefore opted for reasonable growth through the careful selection of new investors, allowing us to welcome new qualified members while maintaining a high ROI.
After all, we built the Creative IPO Fund for the long term, as IPOs will not disappear any time soon.
And here we are. In 2015 we participated in 54 deals (compared to 51 in 2014). 30 IPOs took place in the US, 14 in Asia, 8 in Europe, and one in Canada. We had 40 winners, 8 losers and 6 neutral performances. Our best pick this year was Shopify, with a staggering +53.71% profit. Our worst deal was Mindbody with a loss of -5.36%.
The annual ROI for funds invested on January 1st 2015 was +43.67% (+40.67% in 2014) before the dividends split.
The outlook for 2016 is very promising. We foresee a strong pipeline in Asia, especially in HK, which last year overtook New York as the world’s biggest IPO capital. Just as we experienced in 2015, Chinese companies will likely bring the biggest deals (China Postal Bank, Lufax, China Merchants Securities, Taikang, China Communications Construction).
In the U.S., we expect a much better year due to the return of tech IPOs (Nutanix, Coupa, Okta, Twilio, SecureWorks) , the rise of long awaited Private Equity backed deals (Albertsons, US Foods, Univision, Neiman Marcus), and the surge of profitable growth companies (SoulCycle, BATS, Frontier Airlines).
On behalf of the Investment Manager and the Creative IPO Fund administration team, we wish you a prosperous year in 2016!