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Salt to list carbon credit fund; Punakaiki goes low in round six

OCTOBER 14, 2018

The Auckland-based Salt Funds Management is to launch a unique NZX-listed product targeting the carbon credits market.

In a cache of documents filed last week, Salt says the new Carbon Fund will “buy and sell carbon credits on emission trading schemes, or hold cash based on our own analysis and assessment of the market”.

Initially to invest in carbon credits issued under the NZ emissions trading schemes (ETS), the new Salt fund can also buy similar assets offshore such as in the European Union (EU), which houses the world’s largest market of the kind.

“Salt may invest in other offshore schemes other than the EU ETS in the future if it considers the scheme is sufficiently established and provides a robust investment opportunity to the Fund,” the offer document says. The fund can also allocate to other unit trusts listed on the NZX or ASX that invest in carbon markets or relevant derivatives.

The manager would consider a range of factors including technology, politics, regulation, fuel prices, weather and climate change in pricing carbon credits. However, Salt says the carbon fund has no “appropriate” broad-based benchmark to gauge performance against.

“This Fund is the first fund, listed or unlisted, to invest in carbon credits in New Zealand. Therefore, there is no peer group index for carbon credits in NZ,” the offer document says. “Nor do we believe there is an appropriate peer group index that is useful in assessing the performance of the Fund. The price of carbon credits on the NZ ETS has a correlation to other major asset classes of close to zero.”

The carbon product will be structured as a portfolio investment entity (PIE) – listed on the NZX – with MMC to provide unit-pricing and registry outsourced to Link. Guardian Trust is both supervisor and custodian.

Salt will open up the carbon fund for initial offers over October 23 to November 5 before officially listing on the NZX Main Board on November 8.

Headed by Matthew Goodson and Paul Harrison, Salt may roll out other listed funds under the master trust deed housing the carbon fund. The Australasian shares manager looks after about $2 billion on behalf of retail and institutional investors including marquee clients Westpac/BT and AMP Capital.

Also last week, the roughly $40 million tech-flavoured Punakaiki Fund has embarked on another (its sixth) capital-raising round, this time featuring a super-low minimum investment of $215.

Punakaiki, which invests in a range of fast-growing NZ firms, is offering shares at $21.50 each with a minimum subscription of 10 shares (and no maximum) “to make further investments into existing and new Portfolio Companies, and to pay our operating costs”.

Currently, the fund holds 18 active investments “with 13 generating annual revenue of over $1 million, of which five are currently achieving annual revenues of over $5 million”, Mike Bennetts, Punakaiki chair, says in a letter to investors.

Bennetts says Punakaiki is looking to invest $2.75 million in existing portfolio firms Melon Health, Devoli and Coherent Solutions by the end of 2018. He says other holdings such as Conqa and Mobi2Go, Boardingware and RedSeed would benefit if the fund raised $10 million.

“We remain swamped with other high quality opportunities from inside and outside our current portfolio, and funds beyond $10 million would be applied there,” Bennetts says.

According to the offer document, the Punakaiki fund has achieved a 24 per cent internal rate of return since launching in 2015. The fund, founded by tech enthusiast Lance Wiggs and Chris Humphreys, has a 2 per cent annual management fee plus a performance fee that will garner 20 per cent of any net gains above 10 per cent per annum (with high watermark restrictions).

Wiggs said in 2016 that Punakaiki hoped to list on the NZX when it hit $100 million.

“While we still intend to list on a stock exchange like the NZX, our recent shareholders’ vote on the matter was clear that there is no urgency, and we will reassess this proposal in 2020,” Bennetts says in the letter. “We are working towards our target of $100 million in assets, which will provide Punakaiki Fund the desired scale for listing.”

The latest offer is open from this Thursday (October 18) until November 14.



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