Case study of the Acorn Capital NextGen Resources Fund
The Acorn Capital NextGen Resources Fund is managed by two geologists – portfolio manager Rick Squire (pictured) and analyst Karina Bader. Combined, they have more than 40 years experienced in the resources sector. In this Q&A with Industry Moves, they explain how the fund offers access to unique in-demand metals.
Why did you decide to launch to Australian investors?
Investors can see the global transition to a low-carbon economy is creating a wave of demand for metals such as lithium, cobalt, nickel, and the rare earth elements. However, most major resources companies provide little or no exposure to these metals so investors are being forced to enter the challenging world of small- and mid-sized companies with early-stage projects (i.e., exploration and development). Acorn Capital launched the NextGen Resources Fund in September 2020 to provide investors with a diversified Resources and Energy portfolio that is strongly exposed to clean-energy commodities.
What is unique about this fund?
Acorn Capital has almost 20 years of sector learnings and institutional memory from investing in microcaps in the Resources and Energy sectors. Moreover, the NextGen Resources Fund is run by two fund managers who are both geologists. We bring a unique combination of technical and financial skills that are needed to evaluate small- and mid-sized companies and the breadth and depth of knowledge that are required to screen the hundreds of companies in this universe.
How do you research market opportunities?
At the core of the selection process for the NextGen Resources Fund is Acorn Capital’s proprietary database, which contains data for more than 1,300 companies and more than 6,500 resource entries. This database is regularly updated and is used to screen and rank new and existing companies to identify the best opportunities. A shortlist is then used to undertake qualitative research, which includes desktop reviews, company meetings, site visits and a consideration of ESG factors for the prospective companies.
How did you decide on service providers?
We have long-term relationships with tier one service providers, all of who are monitored on an ongoing basis. Each service provider underwent a strict due diligence process to be selected. The process focused on selecting providers who are aligned with Acorn Capital’s goals of delivering attractive outcomes for our investors. Factors such as cultural compatibility, reporting capabilities, transparency, track record and competitive pricing were considered.
Can you explain the fee structure?
The management fee is 110 basis points per annum plus a performance fee of 20 per cent. The performance fee will only be paid if the fund’s returns are above both the benchmark (S&P Small Resources Accumulation Index) and 0 per cent. This is a very competitive fee proposition for an actively managed resource and energy fund and ensures strong fee alignment of investors.
Who is the product targeted at?
The fund is targeted at family offices, brokers, wealth managers, and high net wealth investors. The fund is currently available via Netwealth and Hub24.