The Merian Chrysalis trust provides access to private investments.
Companies are increasingly having better access to private funding and are coming to markets later.
Since 2011, the age of companies at initial public offering has nearly doubled to 11 years, while the number of companies listing each year has halved since the financial crisis, which means private investors have been increasingly missing out on some of the returns.
The Merian Chrysalis fund was launched in November 2018 to access some of these companies.
The trust focuses on companies that are close to listing. The team consists of experienced investors in smaller companies and has the resources and expertise to do the research and analysis of the unlisted companies.
Investee companies go through a thorough screening process, which filters out most companies. The team looks for businesses able to generate growth rates substantially above average and can protect these growth rates for a long time.
It is important the company has demonstrated a proof of concept that implies it can generate revenues and the ability to earn superior returns as the company grows.
Finally, valuations need to be attractive, particularly against a listed market backdrop, giving the trust the opportunity to earn a multiple of its entry valuation.
Once candidates are through the filter they are subject to detailed analysis, modelling as well as meetings with management and external due diligence, including financial, legal, commercial, regulatory and technology reviews.
The trust becomes a supportive, but not an intrusive, owner and retains the ability to continue to hold the investments after the companies have listed.
The trust will be a very concentrated portfolio and given the investment is in smaller companies and pre-IPO businesses it is also investing in a risky area of the market.
As such it is far too early to consider the performance of the trust.
This trust offers an attractive way for investors to access the private market with an experienced team of investors, but currently, you will have to pay a premium to do so.
Adrian Lowcock is head of personal investing at Willis Owen
