Privy to the investment patterns of millennials seeking alternative asset classes, micro-investing fintech Raiz (ASX: RZI) is creating opportunities to enter the property market via ownership of a solitary brick in a house through the addition of residential property to their portfolios.
The addition of residential property to the Raiz portfolios continues a trend the Company has identified where it expanded its traditional stock-only portfolios into cryptocurrency in May 2020. Since the inception of Bitcoin within their Sapphire Portfolio (consisting of 5% BTC), the price of Bitcoin has risen from USD $9,000 to now trade around $55,000.
Expansion into residential property for portfolio construction is being facilitated by Raiz’s acquisition of Superestate, a niche integrated superannuation and residential property investment platform, for AUD $9.5 million.
“This acquisition, the first in our five-year history, marks an important milestone for the group by demonstrating organic growth is not our only option to increase funds under management (FUM) and Active Customer,” said Raiz CEO George Lucas.
“The acquisition provides tangible benefits to the customers of both financial services groups. Raiz secures the capability to offer residential property as an asset class in and outside superannuation in much the same way that we successfully introduced Bitcoin to our customers, giving them a means of investing in cryptocurrency.”
While the acquisition will enable Raiz customers to modify their portfolios on the Raiz platform, some of which will realise capital gains if selling out of Bitcoin, the acquisition also includes the Vali platform.
Vali holds a database of more than 13.5 million property valuations and will increase the analytical capacity of Raiz and its portfolio management system.
Originally founded by former Olympic swimmer Grant Brits who won a bronze medal at the 2008 Beijing Olympics, Superestate now has over $70 million in Funds Under Management from 6,000 investors with eight houses under management.
The $9.5m acquisition will be funded entirely by RZI shares where Raiz will issue 5.3 million shares at an Issue Price of $1.7845 (10-day VWAP).
“For Superestate customers, they will benefit from the Raiz App investor reporting capabilities and other features that Raiz offers, such as Raiz Rewards, where cash backs from shopping online can be invested into superannuation,” said Brits.
“There are also mutual benefits with the acquisition allowing Raiz and Superestate to increase scale, further asset diversification, and operational and growth synergies, all of which will allow the combined group to grow at a faster pace.”
Off the back of their hugely successful offering of Bitcoin in micro-investment portfolios, Raiz reported a very strong March quarter, increasing their Funds Under Management by 14.6% to $694.3m. Customer growth was even more impressive, increasing 22.1% to 419,552.
Portfolios are funded by customer loose change and rounding to the nearest dollar on transactions with Raiz’s revenue primarily generated from monthly management fees.