HMC Capital Ltd (ASX: HMC) shares were under pressure on Tuesday after the alternative asset management company released an update.
Its shares ended the session 3.5% lower at $6.01.
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Why did HMC Capital's shares fall?
Investors were hitting the sell button after the company's trading update fell short of the market's expectations.
It revealed that it is on track to deliver FY 2025 operating earnings per share (pre-tax) of 70 cents per share, which is down from 80 cents per share previously. Though, it maintained its distribution guidance at 12 cents per share.
New fund
HMC Capital has also revealed plans to launch HMC Capital Partners Fund II (HMCCP Fund II) after a standout performance from its first fund, which delivered a 32% annualised return (net of fees) since inception.
Following a strategic review with the Trustees of HMCCP Fund I, the group has decided to sharpen its focus — moving away from broader diversification and doubling down on high-conviction, high-upside opportunities. This includes both unlisted assets and select listed companies where HMC Capital sees significant potential or the prospect of M&A activity.
The company's CEO, David Di Pilla, said:
HMC Capital Partners Fund I has proven our ability to deliver outsized and uncorrelated returns for investors by applying a private equity mindset to investing in listed equities. We are excited about the upcoming launch of our second private equity vehicle which will target both listed and unlisted opportunities. We have refined the strategy and structure of Fund II to maximise potential returns for investors. HMCCP Fund II will target our highest conviction investments in a more traditional closed-end private equity fund structure.
Should I invest?
The team at Goldman Sachs has run the rule over the updates and remains positive.
In response, the broker has retained its buy rating with a reduced price target of $10.90 (from $12.30).
Based on the current HMC Capital share price of $6.01, this implies potential upside of approximately 80% for investors. It said:
We are Buy-rated given HMC's FUM growth strategy and diversification away from classic Real Estate and into Digital Infrastructure (including DigiCo) among various other strategies including Energy Transition and Private markets.
On the latter we see four key factors supporting FUM growth in the medium term, including: i) increased investor allocation to private markets, ii) a positive skew in borrower preferences to private credit, iii) a structural shift in the public markets to larger deal sizes, and iv) an acceleration in commercial real estate credit due to Australia's undersupply of housing stock.
