Case Study - Loftus Peak Global Disruption Fund
Loftus Peak has just launched an actively managed exchange traded fund version of its Loftus Peak Global Disruption Fund. The addition of the fund to the ASX (ASX Code: LPGD) now makes it accessible to investors via the ASX or directly through the managed fund. Loftus CEO Rick Steele spoke to Industry Moves about the difficulties in getting the dual structure up and running and why he prefers the ETF structure to mFunds.
What were some of the challenges involved with calculating the fund’s iNAV - indicative net asset values - that ETFs need to provide to market?
In our case we have global securities and markets open and close at different times. During the Australian market day there might be 75 per cent of our fund that is not trading.
If there are any securities trading during the day we import those prices and for the balance, based on a reasonably complex researched model, we identify proxy securities that bear some relationship to the securities that we hold. So we end up with an indicative NAV that moves through time. Around that we have appointed Macquarie Bank as a market maker, acting as agent for the fund, providing units either side of that NAV for buyers and sellers to purchase.
How long did the process take?
We took 8 months to from initial discussion to launch.
How does this listing compare to mFunds?
I think this is a terrific solution for investors, for fund managers and, for that matter, for regulators and the ASX and other exchanges. Because if you compare it to mFunds, which was also good, but the downside to the mFund exchange [was the time it took for processing funds].
mFunds was a modest solution in my view. It didn’t neatly solve the problem but what this dual listing does is solve it beautifully.
What investors stand to benefit from this kind of listing?
I think the groups that will benefit substantially from this is are adviser groups who manage portfolios by building portfolios that consist of passive and active ETFs and cash. This would be really helpful to them because it broadens their universe.
There are [also] individuals in SMSFs who make up their own mind about these things and the old way of doing it, of downloading an application process and filling it in, is a difficult process. Some people say its like gnawing your fingers all the way up to your elbow. But if you’ve already got all your credentials with your stockbroker and all you have to do is type in a few letters [it’s a lot easier].
The strategy was launched in November 2016 (and has returned 25.07 per cent per annum since then). How is it currently performing?
We have low turnover, we are setting things up for the next two to five tears, so we would expect to get quite a lot of day to day variability. That’s the nature of having a concentrated portfolio that is designed to pick up important thematics through time.