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Watermark Global Leaders Fund to List on ASX

Watermark Global Leaders Fund to List on ASX
The Company will employ a market neutral strategy which involves both long and short portfolios.
Nov 29, 2016 By Simon Herrmann Tags: IPO, WGF

Watermark Global Leaders Fund Limited will be a Listed Investment Company (‘LIC’) focused on international securities. The portfolio manager is Watermark Funds Management Pty Ltd which has funds under management of over $570m, including two ASX listed LICs being the Australian Leaders Fund (ALF) and Watermark Market Neutral Fund Ltd (WMK). The Company will employ a market neutral strategy which involves both long and short portfolios.

The Watermark Global Leaders Fund will raise $110 million at the maximum subscription by issuing 100 million shares at $1.10 per share. IPO investors will also receive a free option attached to each share. Focused on international shares, the fund seems to be a convenient opportunity to gain diversified international exposure, but what should investors ned to know?



Firstly, the portfolio manager has a strong track record of outperforming the broader market and creating shareholder value. Between 2004 and 2016 the Australian Leaders Fund has outperformed the All Ordinaries Index by over 200% in absolute terms. Having demonstrated its capabilities with other funds, management intends to apply the same stock selection criteria to the Watermark Global Leaders Fund. Furthermore, the company is scheduled to return capital to shareholders via semi-annual dividends starting in FY17.

Watermark will list at $1.10 per share which is a slight premium to book value due to the offer costs. The net asset value of the fund is $1.078 per share, hence there is no discount. Despite the company’s market neutral strategy, the performance of the fund will be subject to overall stock market returns, while any significant downturn may adversely impact the value of the fund. ‘Short-selling’ is an integral part of management’s strategy and IPO investors must be aware that there are inherent risks associated with short-selling as the loss can exceed the initial investment. Poor stock selection may adversely impact shareholder returns.

The Watermark Global Leaders Fund offers diversified exposure to international equities. The portfolio manager has demonstrated its capability to deliver long-term shareholder value having outperformed the All Ordinaries Index with its flagship fund. However, general market risks, short-selling and the risk of poor stock selection are hurdles. The company is projected to distribute semi-annual dividends which makes the LIC a suitable investment opportunity for investors seeking income whilst increasing their exposure to international equity markets.

Shares on Offer: 100m
Listing Price: $1.10
Market Capitalisation: $110m
Listing Date: December 21

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Simon Herrmann Author: Simon Herrmann Nov 29, 2016

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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