VanEck focusses on quality and fundamentals with new ETFs

Wednesday 10th March 2021 Penny Pryor

Arian Neiron

Following a bumper 12 months, and one in which VanEck saw strong flows into its VanEck Vectors MSCI World ex Australia Quality ETF (QUAL), VanEck has launched an international small cap quality ETF – the VanEck Vectors MSCI International Small Companies Quality ETF (ASX: QSML).

It has also just launched the VanEck Vectors MSCI International Value ETF (ASX: VLUE) and the VanEck Vectors Global Clean Energy ETF (ASX: CLNE).

“In 2015 we launched the quality ETF,” Arian Neiron, VanEck's managing director and head of Asia Pacific, said. “What we’ve done today is launch the small cap international counterpart of that.”

“We think we are in early stage recovery… plus with the ultra-loose monetary policy it really sets up the scene to target small caps,” he added.

VanEck has launched eight products over the past 12 months and has experienced the strongest 12 months it has ever had in terms of asset gatherings. It launched its first active ETF last February – the VanEck Emerging Income Opportunities Active ETF – which currently has $50.5 million in assets under management.

“In Australia we consider ourselves on the forefront of smart beta.” Neiron said.

Quality and value return to favour

The small cap fund will target 150 quality stocks that can give investors the upside of small companies benefiting from the recovery environment, but which insulate investors from the downside. Neiron says that the Australian small cap market is just too small to find too many opportunities.

“Overseas the investment universe is just wide and deep and there are so many segments that are just interesting for portfolios,” he says.

And Neiron predicts with more people getting vaccinated, and signs of economic recovery, that value style investing is also returning to favour, thus the launch of the new value ETF.

“Given that growth stocks have just done so well for so many years we’re seeing a sort of rotation [away from growth],” he says.

“There are those old testaments of investing…you’ve got to buy fundamentals, you've got to buy quality, it stands the test of time through and through.”

The fund also has a ‘slight’ ESG overlay and doesn’t invest in tobacco or nuclear weapons.

“[It] completes the suite of our target factor investing,” Neiron says.

The future

Looking ahead, Neiron says they are working on a range of different opportunities and exploring what is possible with fund managers.

With the new design and distribution obligations (DDO) due to come into effect in October of this year, Neiron expects there to be even further growth in the exchange traded product market.

As part of the DDO all product providers will be required to complete a target market determination (TMD) which needs to include things like details of the class of consumers the product is targeting and any distribution conditions and restrictions the product might have. It must also detail when and how a TMD might be reviewed

“We think from a regulator standpoint, and for a fund manager as well, if you design anything with a retail investor in mind [you will meet the requirements],” Neiron says.

“That's why a lot of active managers are going to be launching ETPs.”

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