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Q&As and Interviews
Paulo Herman Nov 12, 2015
Kathleen Smith (K.S.): Renaissance Capital provides Pre-IPO research and IPO analytics for many institutional investors. This unique and proprietary research provides an edge in stock selection. The Global IPO Fund (ticker: IPOSX) was launched to provide investors with the benefit of a portfolio selected using this research edge.
MutualFunds: Who should invest in your mutual fund?
K.S.: The mutual fund is appropriate for individual investors and clients of wealth-management firms who seek to diversify their portfolios.
MutualFunds: What added value does the mutual fund provide versus the ETF?
K.S.: The mutual fund is actively managed and can include IPOs at the offering price.
MutualFunds: Could you tell us more about your management team as well as the performance of the fund?
K.S.: Linda Killian, a founding principal of Renaissance Capital, is the portfolio manager. She is a CFA, and prior to joining Renaissance Capital, was a portfolio manager at Wertheim Schroder and Citi. The three-year performance of the fund, ex fees, outperformed the mid-cap growth benchmark. After strong outperformance through the first half of 2015, the fund turned negative. Much of the downturn related to poor performance from the energy sector and the large tech IPOs such as Alibaba and Twitter. The 4Q has started out with a strong comeback.
MutualFunds: What type of companies would you usually invest in? Could you mention some in recent history?
K.S.: The managers of the Global IPO Fund look for the larger, more liquid IPOs, with strong fundamentals and leadership in their industries. For example, the fund owns leading payment-processor First Data, the largest IPO of the year, priced at a discount to peers at the time of the IPO. Information Technology, Healthcare and Consumer tend to be heavily weighted sectors because these sectors produce more innovative new companies. The fund received shares of Facebook on the IPO and has continued to hold much of this position since then.
MutualFunds: As we saw this past October, Albertsons Cos. Inc. delayed its IPO due to the market swings in August and September. We also have seen U.S offerings at a level well below last year, which was the best year for listings since the Tech Bubble. What is your view regarding the IPO market?
K.S.: The IPO market is all about price discovery. Currently, the IPO market is going through a reset process in which issuers going public must provide discounts to IPO investors. Markets such as these, in which investors are in the driver’s seat, are the best markets for returns in an IPO strategy. During these times, only the highest-quality, most attractively valued companies are able to go public.
MutualFunds: A lot of people say that IPOs in this market are overvalued. What’s your view regarding this statement?
K.S.: Newly public companies go through periods of excess valuation and deep discounts. Except for the biotech sector, we currently see a lot of rationality in the valuations of newly public companies.
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