IPO Watch: Fund manager GQG set to be the biggest IPO of 2021 by far

Pexa (ASX:PXA) is set to be easily eclipsed by GQG Partners (ASX:GQG) as the biggest ASX IPO for 2021.

GQG is a Florida based asset manager that is raising over $1 billion in a deal spearheaded by UBS and Goldman Sachs. It is set to enter the bourse in 2 weeks time – on October 26 at 12.30pm (AEDT) – with a market capitalisation of over $6 billion.

This would see it rival Magellan (ASX:MFG) and easily beat Challenger (ASX:CGF) and Pendal Group (ASX:PDL).

The company was founded in 2016 by Rajiv Jain, formerly head of the investment arm of Swiss bank Vontobel. As at August 31, 2021 it boasts Assets Under Management (AUM) of US$88.7 billion.

This is split across 4 strategies: one US focused, two global or international focused and emerging markets all of which have a large cap focus.

The company has pledged to invest the majority of after-tax proceeds into its strategies and to be adaptable in the context of the global environment.

“When we founded GQG we started with a blank sheet of paper and tried to design a firm based on our learnings – both successes and failures – from our careers in investment management,” Jain told prospective shareholders in the offer document.

“We did not try to perpetuate the same thing we had done historically, but instead tried to create a firm that was well positioned for the market environment we were entering, and could adapt to tomorrow’s changing environment.”

“This culture of adaptability permeates our organisation, and we hope it will continue to make us nimble and responsive in the years to come.”

Why would GQG list in Australia?

You might wonder why it is listing in Australia? One hint was in its prospectus where it listed a reason for the offer as to “provide increased visibility in retail markets, especially in Australia”.

It also plans to increase its presence in Australia.

GQG noted Australia’s superannuation scheme which increases participation by retail investors compared to other markets.

“We have invested heavily in building our presence in Australia with a dedicated team and fund infrastructure to benefit from the superannuation system and long-term investor focus that make Australia a key market globally for the asset management industry,” the company said.

So far as being a listed company generally goes, Jain said the rigours of being a listed company would help its cause.

“We believe a transparent, market-valued currency is a valuable tool as part of a compensation scheme for attracting and retaining talent,” he said.

In addition to its growth prospects the company noted its competitive fee structure, leveraged distribution model as factors that would help it stand out in this ultra-competitive industry.

How has COVID impacted the company

You might be wondering how COVID-19 has affected the company?

The pandemic hasn’t stopped it from growing its Assets Under Management – yet, but it was no guarantee the good times would roll on or that further disruptions would not occur.

It noted in particular the withdrawal of stimulus as a key threat to markets.

“While in many economies, these measures have been successful in restoring growth, the withdrawal of this support may result in further market volatility or economic disruption, and there is uncertainty about the long-term consequences of these measures,” GQG said.

“If the COVID-19 pandemic is prolonged and/or actions of governments and central banks are unsuccessful in mitigating the economic disruption, the negative impact on global growth and global financial markets could be amplified and may lead to recessions in national, regional or global economies.”

The company prospectus noted a US$1.4 million reduction in general and administrative costs occurred between FY19 and FY20 due to lower travel costs, office supplies and meals and entertainment expenses.

But it forecast this category to rise again driven by “team-building expenses” as well as office equipment for new leased premises. However, it also assumed travel expenses would rise as restrictions began to ease from the middle of next year.