Fixed income fintech Blossom targets $50m in funds as client base grows beyond Millennials

Blossom, a fintech startup barely two years old, is targeting $50 million in assets under management by the end of this year after outgrowing its original brief to shake up the fixed-income sector by targeting female Millennial investors.

Co-founded by Gaby Rosenberg at the end of 2020, Blossom officially began operations in June 2021 with 850 customers and $3.5 million in funds under management (FUM).

Last week, Blossom announced on social media a tenfold increase in funds under management to $35 million (FUM). Since then, Rosenberg revealed to Business News Australia that funds have now grown to $36 million from 7,950 customers.

It’s an emerging growth story for Rosenberg, a conservative investor who founded Blossom with a mission to democratise the fixed-income sector for Millennial women. Although she has worked in startups her entire career, Blossom is Rosenberg’s first foray into the finance space – a field in which her family is well grounded.

“I come from a long lineage of finance professionals so there are always interesting discussions and always new ideas,” she says.

Blossom is named in honour of Rosenberg’s grandfather Bertie, who died of pancreatic cancer in 2020.

“He used to bring the whole family together, and now Blossom is doing the same thing,” she says. “Everyone is helping out.”

Rosenberg’s father Lance is CEO of Gleneagle Securities, which is the responsible entity for Blossom’s fund.

“We're a business that is majority female owned, co-founded and operated and all we want to do is provide easy-to-understand access to fixed income in a flexible way,” says Rosenberg.

Her vision for Blossom was framed during the height of the pandemic, at a time when Rosenberg was looking to get on top of her own personal finances but found the market fraught with barriers to entry.

“I am inherently risk averse with my money and any asset class that offers consistency is super attractive to me,” she says.

“Most of the fixed income funds out there had long lock-ups of three, six and 12 months, and they also had high minimum entries and high fees.”

Rather than a minimum of $20,000, Blossom has created a simple product that can start with $1 or less that can be topped up or withdrawn like a conventional savings account.

“There is no one out there solely doing fixed income like we are – with $1 minimums, no account fees, posting earnings every day, and fast and easy withdrawals,” says Rosenberg. “We are carving out an ideal niche.”

Blossom is currently targeting annual returns of 4.25 per cent, a figure that is benchmarked against the RBA’s official cash rate.

“If the cash rate goes up, then we’ll generally respond,” says Rosenberg. “We started in 2021 at 3 per cent, then we went to 3.5 per cent, then 4 per cent and now we are on 4.25 per cent.”

Blossom seeks to make an additional 1 per cent margin on its investments, from which it sources its profit, with any surplus preserved to support the targeted interest rate for investors.

“So far we’ve been tracking really well,” says Rosenberg. “We met our 1 per cent margin in 2021 and 2022, and we’re on track for 2023 as well.

“We don’t have a government guarantee, so the return to investors is not guaranteed, but we’ve had a 100 per cent positive month since inception. Every month we have met the target return which we post to our client accounts every day.”

Taking the middle ground

Rosenberg sees Blossom taking the middle ground in the finance space, which has been inundated by innovative fintech players.

“We’re democratising an asset class. The banks are on the left with steady returns and low risk, and the fintechs and other micro-investing platforms are on the right with higher risks, but also with fantastic tech functionality.

“We have taken the best bits from everyone, and we see ourselves operating in this middle ground.”

Rosenberg has joined forces with asset manager Christian Bayliss at Blossom, bringing to the company his extensive experience in global fixed-income strategies with UBS and the Reserve Bank of Australia.

Bayliss is chief investment officer of Fortlake Asset Management, which manages Blossom’s funds – a mix of investment-grade assets such as semi-government, government and corporate bonds, mortgage-backed securities and cash.

“It’s a really diversified portfolio - all fixed income assets and conservative,” says Rosenberg.

“We are very actively managing the investment that is tied around a savings app that has cool functionality, really important brand values and the purpose of achieving savings goals.”

Blossom is also driven by an ethical investment philosophy that is core to its brand and investments.

“From an investment perspective, we have strict exclusion and eligibility criteria for what we will and won’t invest in – so we have no coal, oil, gas, child slavery, prohibitive weapons and tobacco in our investments,” says Rosenberg.

From a brand perspective, for every new funded account Blossom plants trees in an Australian bushfire-affected region, while also supporting pancreatic cancer research through the Garvan Institute via Blossom’s referral program.

Beyond the Millennial niche

After two years growing the business, Rosenberg has discovered that it’s not only Millennial women who are hungry for Blossom’s investment offering.

“We have a really diverse customer base,” she says. “The first is female Millennials who just want to be more savvy with their savings. We also have young mums who want to make a passive income.”

But Blossom is also finding a niche with financially literate males aged 28 to 35 who want to add to an already diversified portfolio, with fixed-income exposure.

“Then we have a really interesting cohort aged 55 to 65, who are very financially literate, high-net-worth males who are using us as an alternative to a term deposit for big volumes of cash moving between investments.

“With term deposits there is a lock up, but with Blossom this type of customer feels like the cash is at call and so we see quite a lot of interest from these high-net-worth males.”

Rosenberg has big ambitions for Blossom, envisaging that the fund could grow to $1 billion in assets under management.

“We don’t want to grow this for five years and look for a quick exit. We’re getting comfortable for the next 10 or so years.

“We absolutely have our sights set on hitting $50 million by the end of 2023 with 20,000 customers - and then getting to $100 million, $500 million and $1 billion. We want to become Australia’s fixed income app.”

Blossom is looking to reach these heady heights by building on its app, with plans to roll out fixed-income products with ‘higher yields, different characteristics and flexibility’.

“But looking shorter term, we have a lot of new features on our road map. We have lots of new products, like Blossom for kids, joint accounts, Blossom for business, and new market expansion as well,” says Rosenberg.

“What we are really excited about is our new Blossom as a service. We have a B2C side of the business, but we also have a B2B side. That basically means that Blossom partners can just unplug the Blossom app and plug in their own front end to provide access to our fund.”

Blossom already has lined up three customers for its B2B offering, with one of them now live.

“For us, it’s a winning strategy because we save on the cost of acquisition, we’re distributing the products and we focus on our ‘north star metric’ which is funds under management - where we make our money,” says Rosenberg.