Punakaiki Fund Limited makes long-term investments into high-growth, revenue-generating New Zealand companies. We hold $35 million in assets (March 2018) and have investments in 20 Portfolio Companies.
Board of Directors
Our Board of Directors bring depth and diversity of experience to their roles, including involvement in asset management, various legal and regulatory environments, and family-owned businesses.
The Board’s core responsibility is approving and monitoring adherence to the investment objectives, risk management strategies, policies and philosophies of Punakaiki Fund, and to ensure Punakaiki Fund meets its statutory obligations. Part of these core responsibilities include monitoring LWCM’s and Punakaiki Fund’s Performance…(read more)
Annual Report 2018
Investment Approach and Performance
We believe that the following philosophies provide the greatest opportunity to generate significant returns for our Shareholders:
- New Zealand Focus: We believe that there are consistently large numbers of high quality New Zealand-based companies seeking funding, but that there is a general shortage of well-directed growth capital. We also believe that there are market inefficiencies for the supply of growth capital in the New Zealand market.
- High Growth Focus: We believe that well-selected high-growth companies can generate risk-adjusted returns for our investors that are higher than those from public markets.
- Investor of Choice for Founders: We believe that a founder-centric approach to investment and management attracts the best high growth investment opportunities to Punakaiki Fund.
- Attractive Portfolio: We believe that holding a highly regarded portfolio of investments attracts other highly regarded companies to seek investment from Punakaiki Fund.
- Long-term Investment: We believe that holding investments for the long term delivers higher returns to our investors.
- Diverse Portfolio: We believe that portfolio diversification reduces the level of risk for a given amount of return.
Punakaiki Fund’s investments have delivered a Gross IRR of 25% (a 51% increase in value, all to 31, March, 2018) based on assessed changes in fair market valuation, as well as dividends received (read more).
For more detailed information, please check out our founding documents, annual reports, board members and other investment links in our Key Documents section.
Key Risks Affecting This Investment (as at November 2017 PDS)
Investments in shares are risky. You should consider if the degree of uncertainty about Punakaiki Fund’s future performance and returns is suitable for you. You should also consider whether the price of these Shares fairly reflects the potential returns and the particular risks of these Shares. The most significant risk factors that could affect the value of the Shares, as determined by Punakaiki Fund, are set out below.
Loss of value due to the poor performance or failure of one or more of the Portfolio Companies, which would cause the value of the investment assets of Punakaiki Fund to be revalued downwards. The Manager actively monitors performance of the Portfolio Companies and Punakaiki Fund marks down the carrying value of any underperforming investments. To date, investments representing 30% of the value of the assets of Punakaiki Fund have, at some time, been marked down from a previous carrying valuation. The investments we currently regard as highest risk are valued at under 18% of the Investor Net Asset Value, which is the value of the assets plus working capital less accrued performance fees.
Higher volatility in the valuation of Punakaiki Fund investments than in public market indices. This reflects the heightened valuation volatility that the Portfolio Companies have in response to public market valuation movements (e.g. downwards and upwards movements in the ASX, NZX and international share market indices) due to their smaller size and higher growth. For clarity, a sudden 30% fall or rise in global share markets would likely result in a greater fall or rise in the valuations of Punakaiki Fund’s investments. We maintain a long-term perspective on investments, which can make us less sensitive to some short-term volatility.
Ongoing capital raising (such as Share issues) do not meet Punakaiki Fund’s needs or expectations. Punakaiki Fund requires cash to meet its operating expenses and to make further investments. If Punakaiki Fund does not continue to raise sufficient capital or sell investment assets including any listed shares it holds then it may fail, in which case the Investor Net Asset Value per Share is likely to fall significantly. We set aside a reserve of 2.75% of Accounting New Asset Value immediately after any Punakaiki Fund capital raising event to meet our operating costs over the following 12 months and in addition have successfully raised $19.4 million in cash since April 2014. We also hold shares in an ASX listed company that are able to be sold.
High concentration of investments in technology businesses give Punakaiki Fund greater exposure to technology sector volatility, with the risk that a downwards valuation in the entire technology sector could have a more significant impact on the valuation of Punakaiki Fund’s portfolio of investments than on a more diversified portfolio. We invest in companies which provide us with exposure to a diverse range of industries to help mitigate our technology and SaaS business model concentration.
Uncertainty about the valuation of companies, with the risk that the valuations could be too high (or too low) versus the market values. Punakaiki Fund’s auditor Ernst & Young draws attention in their Independent Auditor’s Report on the FY2017 financial statements to “Note 3.1.1 to the financial statements which describes the inherent uncertainty and difficulty in measuring the fair value of early stage unlisted investments.” Punakaiki Fund uses revenue, EBITDA, revenue growth rates and public market valuations of comparable companies; along with performance, small company, control and liquidity adjustments, to guide periodic valuations of the portfolio. Punakaiki Fund also uses valuations provided by external providers, and public market stock prices to value investments in listed assets.
The loss of the poor performance of key people, specifically Lance Wiggs and Chris Humphreys from Lance Wiggs Capital Management (LWCM), the Manager. The Management Agreement can be terminated by the Board for cause, and by shareholders with a majority vote, each without penalty.
This summary does not cover all of the risks of investing in Shares. You should also ready Section 8 of the
PDS, Risks to Punakaiki Fund’s Business and Plans, on page 49.