Taking a long-term view on new opportunities

Positioned to withstand the current uncertainty in the macroeconomic environment and volatility in financial markets, the WAM Alternative Assets portfolio includes more diversification in its income-producing component. As portfolio manager Dania Zinurova explains, this is part of her long-term view on investment decisions.

In the following video, and the accompanying transcript, Zinurova details some of her areas of focus, including:

• Water rights,
• Private Debt,
• Core infrastructure, and
• Core healthcare.

Watch the following interview, or read the transcript, for a detailed explanation, as Zinurova sits down with WAM’s Camilla Cox.

Edited transcript

Camilla Cox: Welcome to WAM Vault. I’m here today with WAM Alternative Assets (ASX: WMA)  Portfolio Manager Dania Zinurova. Dania, it has been a really busy year for WAM Alternative Assets. Can you give us an update on the portfolio?

Dania Zinurova: Indeed a very busy period for us and the portfolio has continued to evolve. One of the areas of focus for us has been to reposition the portfolio, reduce a fairly concentrated exposure to water rights, so we have been successful in implementing the strategy where we have started redemptions out of the water rights strategy and the goal is really to have around 15 – 20% over the medium to long term in this asset class.

I still love the asset class. It has a number of really attractive benefits for the portfolio; however, I have been focusing on including water reciprocation in the income part of the portfolio.
As we stand now and we look at the portfolio we have water rights, we have private debt, we have core infrastructure and core healthcare real estate in the income producing part of the portfolio.

At the same time, as we continued exiting matured private equity investments and infrastructure investments, we reinvested capital into new investment opportunities and we partnered with high quality investment teams such as Allegro Partners, Adamantem Capital and others and with them we are deploying capital into a private equity turnaround and transformation into mid-market buy out opportunities and others.

The portfolio is really well positioned to withstand current uncertainly in the microeconomic environment and current volatility in the financial markets.

Cox: We are now well into FY2023, how are you positioning the portfolio?

Zinurova: The good thing about alternative investing is that it is a long term investment strategy and what we have been doing over the last two years and over the last four to five months is really identifying those new investment opportunities and committing capital. However, in the alternative investment world when we commit capital it does not mean that the capital is invested immediately. It does take time to find those investments and to deploy the capital.

So, when we look at the portfolio, we have a very good level of cash which means we are well positioned to tap into new investment opportunities over the next six to 12 months and we will continue deploying capital in healthcare real estate, infrastructure, private debt and other new investment deals that we find.

I would also add that looking at the recent exits of the matured investments the portfolio has delivered really strong investment returns and our profit reserve as at the end of September this year has been at about 20.9 cents, which is a strong dividend coverage ratio that gives us certainty over the dividends for the next five years and historically Wilson Asset Management has been really focused on paying a stream of growing fully franked dividends to our shareholders.

Cox: Can you talk us through any recent exits?

Zinurova: We had an excellent, I would say stellar exit, and just to clarify when we talk about exit that means an investment has matured and we are ready to sell our position in this investment. In the alternative investment space we refer to this as exit.

One of the most recent exits was Shopper and that was an investment made in 2017 by one of our investment partners, Fortitude Investment Partners. It has one of the fastest-growing offline media business in Australia.

Fortitude Investment Partners has really successfully implemented the growth strategy with the business and worked closely with the management team to grow the business. We exited the business to Cartology which is one of the leading media business owned by Woolworths (ASX: WOW) and the performance speak for itself. The exit was above carrying value and we were really glad with the result of this investment.

Two other exits were in infrastructure and real estate. In the US, we owned a business called esVolta, which is one of the leading energy storage business in the US servicing large scale energy providers and it has been a business experiencing very strong growth over the past few years. With an increasing investor focus on energy transition, there was really strong demand for this type of business. So, the business was exited as well at premium to its carrying value.

Another recent exit was a real estate industrial asset in New South Wales. The investment was managed by one of our investment partners Centennial Property Group. Excellent timing in terms of the market positioning. We saw strong demand and they ran a competitive bid auction, so the result was again exit at bath carrying value.

Cox: Dania, what about any new investment partners this year?

Zinurova: We did commit capital to a new investment partner ICG. It is a global leading alternative investment manager and they really specialise in private debt in Australia and in other regions. For me, this asset class is really important in terms of having exposure to it in the portfolio because when we look at private debt, usually the deals are structured as floating rates which means as interest rates we see this increase in income returns climbing from private debt. So I really see it as a very good interest rate hedge within the portfolio.

Cox: Those new partners sound great Dania. What are your plans for the rest of the year for the portfolio?

Zinurova: The rest of the year, I am continuing to focus on growth opportunities. We are currently doing investment due diligence on growth, mid-market buy out, private equity strategy potentially with a bit more focus on Healthcare and within our portfolio one of the themes that we closely follow is growing ageing population which then translate into growing demand for good quality healthcare services.

Having more exposure to these types of opportunities will be really good for us and we are also looking, I am very excited about this, but we are also looking at some co-investment opportunities in private equity growth. So, we will definitely keep the shareholders up to date on that one.

Cox: Fantastic. Thanks Dania, it has been great to chat.

Investing in 2023

In this year's WAM Vault video series, our investment team discuss how they are utilising the proven investment processes to identify new opportunities in the market and share their outlooks for investing in 2023. You can find out more here.