Introduced to the relatively conservative asset class by her family of investment professionals, and turned off by minimum investments north of $20,000 and lock-up periods of up to six months associated with many managed funds, Ms Rosenberg built the Blossom app to provide exposure to the bond market with no minimum investment.
She believes there is a sizeable niche within the new generation of investors, especially young women, keen to forgo the turbulence of equity and cryptocurrency markets in exchange for a smaller but more dependable return on investment.
Distinguishing itself from the batch of popular micro-investing apps such as Raiz and Spaceship, backed by exchange traded funds comprising listed stocks, Blossom sees itself as a savings platform first and foremost.
“You can jump in the app, set a savings goal, you receive a personalised flower. And then you watch your flower grow as your savings blossom,” Ms Rosenberg said. “We really want to help Australians build and foster healthy savings habits.”
Initially, Blossom’s customers will invest in boutique fund manager Fortlake’s Real-Income Fund, made up of A-grade corporate and government bonds and mortgage-backed securities.
Once the contribution of the Blossom micro-investors reaches scale of about $50 million, their units will be split out into a standalone “Blossom Fund” to be managed by Fortlake and its chief investment officer, Christian Baylis.
‘Cash is hugely risky’
The fund will target a return of 3 per cent a year. Investors will pay a management fee of 1 per cent, which is triggered only when the product meets its intended return.
In a “waterfall structure”, half of the management fee goes to Fortlake as the investment manager and the other half to Gleneagle Securities as the licensee and responsible entity.
Any return above 4 per cent will be paid to a “threshold manager” – effectively a capital buffer held by Blossom to cover any shortfall if the fund underperforms, ensuring investors receive their targeted 3 per cent return.
“What we’ve tried to do is harvest the returns to make sure the end consumer doesn’t have to pay any fees,” said Dr Baylis. “We take all of the risk over 3 per cent and deal with the other elements ourselves.”
An economist and UBS and Reserve Bank alumnus, Dr Baylis said the strategy was a sound alternative to holding cash in a deposit for young savers.
“Cash is actually a hugely risky asset class at the moment,” he said. “Because of inflation, taxes and account fees, you could be locking in a loss of 4 per cent, which is a terrible outcome.”
He said Blossom was also preferable to listed fixed income funds for younger investors because they were not charged brokerage or subject to transaction costs and buy-sell spreads pushed up by the low interest rate environment.
Aside from its 0.5 per cent management fee, Fortlake will gain a toehold in the burgeoning market for Millennial and Gen Z consumers, which Dr Baylis said had been until now “unaddressable” for many boutique fund managers because of the cost of customer acquisition and low investment balances.
“If you can get exposure to every part of the market, it diversifies your distribution base, and therefore you have less risk in any one silo,” he said.
Fortlake shareholder and Financial Review Rich Lister Alex Waislitz said: “In a low-interest-rate world, people are looking for smarter ways to make their savings work for them. Blossom is able to provide income and security levels that will appeal to many savers.”
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