Q4 2024 Portfolio Highlights - 248 Emerging Companies Fund & 248 Emerging Companies Fund II

At our recent Quarterly Investor Update call, we provided investors with highlights from our portfolios for the final quarter of Calendar Year 2024. A summary of the key points covered are as follows:

‍248 Emerging Companies Fund
The momentum we saw in domestic markets during the September quarter continued into the December quarter, and at least two of the sale processes we are engaged in for Fund I holdings are expected to be close to, or will, be finalised early in 2025. We are excited to continue returning capital in 2025 and reiterate that our primary focus for the fund remains on seeking liquidity for all remaining portfolio holdings at a price that reflects their intrinsic value.

 Considering a Continuation (Follow-on) Fund

In more recent months a small number of our best-performing investments in the fund have indicated a desire for us to maintain a shareholding in their businesses, partnering with them for their next phase of growth. Discussions regarding one of these opportunities is progressing and, over the coming months, we hope to communicate the ability for our investors to participate in a follow-on investment in this business if they choose. 

248 Emerging Companies Fund II
The December quarter closed strongly with an offer and agreed Scheme for the sale of Mason Stevens, one of the fund’s larger investments. The fund invested in Mason Stevens in October 2022. We were pleased with the outcome; however, we would have been equally happy holding this investment for longer if need be.

Our focus remains on supporting the growth and profitability of our portfolio companies and realising these investments when the time is right. During the quarter, several portfolio companies progressed through processes with bidder engagement. We saw growth stage deal volume steadily increase, reflecting an improvement in both consumer and business sentiment but exit activity in both private and public markets remained subdued, although vastly improved from 12 months ago.

‍Mason Stevens Scheme Details

During the quarter, portfolio company, Mason Stevens, entered into an agreement to sell 100% of its shares to private equity investor, Adamantem Capital. The parties entered into a binding Scheme Implementation Deed, under which an entity owned and controlled by Adamantem Capital will acquire 100% of the shares in Mason Stevens. The Board of Mason Stevens has unanimously recommended the offer at a share price of $2.2293/share. In addition, as part of the Scheme, shareholders may also be entitled to a fully franked pre-completion cash dividend of up to $0.0625/share with an additional $0.0208 in possible franking credits.

The Scheme is subject to conditions, including the approval of the Scheme by Mason Stevens shareholders at the Scheme Meeting (which is expected to be held in March 2025), Court approval, and other customary conditions. The fund is not required to take any action at this time however, we will keep you informed as the Scheme progresses. On the basis that the Scheme proceeds, we would expect to provide a meaningful distribution to unitholders upon approval of the Scheme in March 2025.

‍Market Performance

The market for private companies remains subdued but there are good signs of improving sentiment and risk appetite. The performance of the IPO market in the December quarter was lacklustre, to say the least. The five IPOs that we monitored performed poorly, and earlier listings in CY24 have only just started to break above their IPO price (for example Cuscal, CCL.ASX). While pleasing to see the IPO markets start to open up, it is not ideal or supportive of future IPOs when the majority of the recent ones are all trading below their issue price.

We maintain a keen eye on the global listed markets and performance over the last two years has been nothing short of astonishing. Over the past two years, the US markets have returned +20% performance which is almost unheard of (we understand it to have only occurred five times in recorded history until 2023-24). CY25 will undoubtedly be one of volatility with external market influences, including Trump and AI, driving market volatility.

In the context of the performance of the large end of the market over the last two years, we believe the smaller end of the market is well positioned for outsized returns. Strong growth in well-managed companies (at a reasonable price) will ultimately drive strong returns, and 2025 is well set up for this to occur.

Quarterly Investment Reports 

The latest Quarterly Investment Report for the 248 Emerging Companies Fund and the 248 Emerging Companies Fund II can be accessed here.

Quarterly Investment Call Recording

To view a recording of the December 2024 Quarterly Update Call, please click here.

Please do not hesitate to contact us if you have any questions or would like more information.