The Next Big Thing – Investing in Unicorns

Unicorns are the rarest of beasts. In investment terms, a unicorn is a privately held start-up with a valuation of $1 billion or more. They’re the likes of Uber, Binance, AirBnB, Shein, Epic Games, SpaceX, OpenAI. Disruptive, high-growth companies that you wish you’d invested in from the start. While they tend to be in the technology space, there are unicorns in other sectors, too – from energy and healthcare to insurance, media and retail.

These are the types of companies that Λnβro Capital Investments offers exposure to, via its Λnβro Unicorn Global Equity AMC. a global equity portfolio that is now available on Mesh. The Unicorn Global Equity AMC is a US Dollar-based, capital growth portfolio with a proven track record, having already won two SALTA Awards for Total Return Performance Foreign Equity over three years and Trading Efficiency Foreign Equity.

Of course, some unicorns succeed, going on to reshape their industry like SpaceX or OpenAI. Others don’t. How does Λnβro know which horses to back? “We have a strict set of selection criteria,” says Λnβro CEO Justiné Brophy. “We look for businesses that are run, managed or deeply influenced by the founders or owners. We’ve observed that the companies that have significantly outperformed over time have been those where the founders of the business have remained intimately involved.”

“Another thing we look for is that the company must be solving a real headache-level problem for its customers,” adds Λnβro CIO Craig Antonie. “If you’re solving a major problem for them, they’re unlikely to leave.”

The companies also need to be relatively small by nature. ‘Not only that,’ says Brophy, ‘but the market they’re disrupting or creating also needs to be considerably larger than they are. Netflix, for example, created the market for streaming entertainment – but the entertainment industry itself is huge. Netflix went in there with a novel idea and took the market by storm, and they remain a top player in the space. Tesla is another example. They didn’t invent the car, but they disrupted the entire automotive industry.’

But size and impact aren’t the only measures of a unicorn’s potential success. “The company must also be growing faster than its market,” says Antonie. “That tells us that they’re gaining market share. So the market is growing, the company is growing, and the company is getting a bigger and bigger piece of that growing market. That lends itself to compounding in terms of the business’s size and scale.”

Debt is another factor. ‘We ensure that the companies we invest in have zero debt, if possible,” says Brophy. “Having healthy cash balances on their balance sheet is important, because it means that the company will not be negatively impacted by shifts in interest rates or other economic volatility.”

And there’s the V-word. The underlying in the Unicorn Global Equity AMC includes smaller, high-potential growth companies, which naturally come with higher-than-average volatility risk. “Stocks like this do tend to be more volatile,” Antonie says. “If you look back at some of the most successful growth stocks of our time – whether it be Apple, Amazon, Google or whoever – there have been multiple occasions over their lifecycle that the share price has fallen. But in each case, not only did the share price recover, but it recovered multiples of where it was before the decline. Now it takes a certain type of investor to stomach that sort of volatility. You need to be prepared to invest for at least five, but preferably 10 or 15 years.”

But that volatility risk comes with serious guardrails. The Unicorn Global Equity AMC has a strict benchmark, targeting better performance exceeding the All World Index: Vanguard ETF benchmark (VWRL). “And when these businesses succeed, they succeed handsomely,” Brophy concludes. “If you’re a high-growth-oriented investor, you’d lean toward Λnβro Unicorn Global Equity AMC. Family offices and independent financial advisors who already have long-standing blue-chip portfolios would be looking to enhance those with the Unicorn AMC’s exposure to high-growth equities.”

• Find out more about the Unicorn Global Equity AMC, now available for investors on Mesh.trade.