Case study of the VanEck Bentham Global Capital Securities Active ETF
VanEck has colloborated with Bentham Asset Management to launch an actively managed exchange traded fund(ETF) of global capital securities - the VanEck Bentham Global Capital Securities Active ETF (GCAP). Arian Neiron, VanEck's chief executive officer and managing director Asia Pacific, answered some questions about the process of launching the fund for Industry Moves.
What goes into launching a new product?
The short answer is a lot.
We look at the investible universe and respective asset classes. There is a lot of research and analysis undertaken to determine the opportunity set, mispricing opportunities, information efficiency and so forth.
In determining if we take to market a market capitalisation, smart beta or active partnership approach for an ETF there are a considerable number of variables. With the VanEck Bentham Global Capital Securities Active ETF there is a strong alignment of interest between the two firms. Cultural compatibility is key. So is investment philosophy. Track record across the cycles and an assessment of whether the strategy is a complement to our eco-system of ETF opportunities is important too.
Why did you decide to launch now?
This is many years in the making and we have known the Bentham Asset Management team since working together at Credit Suisse. Australian investors have been investing in ASX listed hybrids for a considerable time. We think it is an opportune time for Australian investors to diversify beyond Australian shores and importantly Australian financials. The opportunity set is considerable and has only been accessible to institutional investors. We are now democratising the opportunity and enabling investors to add to their portfolio a compelling value proposition, particularly in light of a low yield environment and significant duration risk in fixed income.
How did you research market opportunities?
Bentham Asset Management are a highly regarded and recognised specialist credit and fixed interest manager. They have been researching and investing in global capital securities for over 18 years. Their flagship Global Income Fund has had a sleeve of global capital securities and corporate credit for some time. Their investment process is highly robust, combining both top-down macro-economic analysis and bottom up fundamental analysis. Capital preservation is paramount and the emphasis on risk management is what we believe investors are seeking as a permanent establishment.
What challenges did you face and how were they overcome?
There are always challenges in designing and developing new investment opportunities. VanEck is one of the world’s largest ETF providers and has been in the asset management business since its establishment in 1955. Our scale, resources, infrastructure and expertise helps to solve the respective challenges. Our partners and respective stakeholders are tier 1 grade. No product is the same but we have the best team in the country.
How did you decide on service providers?
We have established tier 1 partners. All our service providers undergo a strict due diligence process. In partnering with active managers we want to ensure that there is a) strong cultural compatibility b) intellectual honesty c) a genuine investing edge and d) a commitment to the long term and a demonstrable track record.
Can you explain the fee structure?
There is a management fee of 59 basis points per annum plus a performance fee based on a RBA benchmark rate plus 3 per cent subject to a high watermark hurdle. This is the most cost effective fee proposition for global capital securities in Australia with a strong alignment in providing investors returns above an appropriate premium above a benchmark.