AFIC stays cautious amid IPO boom

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“We will stick with our approach which means we don’t invest in a lot of them, the idea is to keep searching for the good ones.

“There’s been lot of focus on technology stocks, that can mean a lot of companies in that sector would view this as a good time to come to market.

“Our view internally is we’re careful about what we invest in.”

AFIC tends to steer clear of early stage companies, rather seeking out those with strong balance sheets, a sharp competitive edge and ability to become leaders in their field.

“We probably don’t go into ideas that aren’t real businesses.

“You’ve got to be able to grow. If that’s not clear, we prefer to stay on the sidelines.”

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Nuix was an attractive opportunity for its ability to gain market share and the high-quality nature of its client books, Mr Freeman said. And while AFIC will keep an eye on a handful of IPO hopefuls, Mr Freeman will not be drawn on impulse.

“We know might miss the first part of the stock, but if they’re truly right about the quality of the business, they can generate good returns for many years so we’d rather get the confidence on the model before going.”

AFIC released results for Mirrabooka Investments on Thursday, the asset manager’s $503 million listed investment company that provides exposure to small and medium sized businesses.

Mirrabooka returned 33 per cent for the half-year, which beat the relevant index by more than 10 per cent. Mr Freeman said the results were a “validation” of the company’s strategy that focuses on investing in long-term ventures.

Over the course of the year, Mirrabooka sold out of Premier Investments and bought into Corporate Travel Management – two moves designed to respond to the shifting themes of the coronavirus pandemic.

“The retail sector has benefited incredibly well during this period,” he said. “If people wanted to do something with their money – the traditional eating out, going to concerts, all those forms of entertainment have disappeared and it’s really been driven into retail.”

Mr Freeman said Corporate Travel Management was the opposite, and Mirrabooka jumped on the opportunity to buy in while the industry was “down on its knees”.

“Has the sector still got challenges? Absolutely. Do we think it’s a well run company? Absolutely. Do we think they will come out of this with a stronger market position? We think they will.”