Acorn Capital Investment Fund Limited (ACQ) reported a strong FY25 performance with a 15.1% net return and declared 5.5 cents per share in dividends, reinforcing its position in the Australian microcap sector.
- FY25 gross portfolio return of 17.9%, net return of 15.1%
- Declared fully franked dividends totaling 5.5 cents per share
- Top quartile 10-year performance among domestic equity LICs
- Portfolio diversified across listed and unlisted Australian microcaps
- AGM approved re-election of director Robert Brown and proportional takeover provisions
Strong Performance in a Niche Market
Acorn Capital Investment Fund Limited (ASX, ACQ) showcased robust financial results at its 2025 Annual General Meeting, underscoring the effectiveness of its focused investment strategy on Australian microcap companies. For the financial year ended 30 June 2025, ACQ reported a gross portfolio return of 17.9% and a net return of 15.1%, significantly outperforming the S&P/Small Ordinaries Accumulation Index, which returned 12.3% over the same period.
ACQ’s investment universe targets companies outside the ASX 250, typically with market capitalisations below $1.2 billion. This segment is characterised by young, nimble, and innovative businesses that offer growth potential distinct from larger, more established companies. ACQ’s approach has delivered top quartile returns over the past decade, reflecting a disciplined, bottom-up stock selection process combined with diversification across sectors and stages of development.
Dividend Sustainability and Income Appeal
The fund declared interim and final dividends totaling 5.5 cents per share for FY25, translating to an attractive implied cash yield of 5.9% based on the share price as of 31 October 2025. Importantly, ACQ maintains a well-funded dividend reserve and a rebuilding franking credit balance, positioning it to continue paying fully franked dividends. The board’s dividend policy targets at least 5% of post-tax net tangible assets annually, balancing income generation with capital growth.
This reliable income stream, combined with ACQ’s long-term capital appreciation, enhances its appeal to investors seeking diversification and yield in a market environment where microcap valuations have yet to fully reflect recent performance improvements.
Portfolio Highlights and Strategic Investments
ACQ’s portfolio remains well diversified, with its top ten holdings accounting for 26.5% of the portfolio. Notable investments include private companies such as Padua Solutions, a tech-enabled financial advice platform, and Meteoric Resources, a rare earths developer advancing a strategically important project in Brazil. These holdings exemplify ACQ’s focus on scalable, innovative businesses with strong growth trajectories.
The portfolio spans multiple sectors including healthcare, information technology, industrials, financials, and resources, reflecting a balanced approach to risk and opportunity. ACQ’s exposure to smaller market cap companies under $500 million is significant, targeting areas where fundamental mispricing and growth potential are greatest.
Governance and Outlook
The AGM also saw shareholder approval for key governance items, including the re-election of director Robert Brown and the renewal of proportional takeover provisions, ensuring continuity and shareholder protection. The fund’s management remains confident in the outlook for microcaps, noting that recent sector performance improvements typically precede a narrowing of discounts to net tangible assets, which have remained wide despite stronger returns.
ACQ’s disciplined investment approach, combined with its capacity to access both listed and unlisted microcap opportunities, positions it well to capitalise on a potential sustained recovery in the sector. The fund’s commitment to delivering consistent dividends alongside capital growth continues to underpin its value proposition to investors.
Bottom Line?
As microcap conditions improve, ACQ’s blend of income and growth assets sets the stage for potential discount narrowing and enhanced shareholder returns.
Questions in the middle?
- Will ACQ’s dividend policy sustain through varying market cycles and economic conditions?
- How will ACQ’s private investments like Padua Solutions and Meteoric Resources contribute to future portfolio returns?
- When might the microcap sector’s discount to net tangible assets begin to narrow in response to improved performance?