The alternatives sector is unique in that it’s largely defined by what it’s not. Accordingly, how you fit alternatives within your existing asset class structure will depend on relativity, and how the investments interact with the other asset classes according to Atchison’s Kev Toohey.
The private markets juggernaut is one that has also thrown up a wealth of data that other players can use to sharpen up due diligence when making their own investment decisions – especially in the growing secondaries market.
Australian Ethical launches first Australian ETF
Australia’s leading sustainable equity manager, Australian Ethical Investment (ASX: AEF), will list its high-conviction fund as an exchange-traded (ETF) version, later this week.
The move comes following a spate of active ETF conversions, such as the Hyperion Global Growth Companies Fund (ASX: HYGG) which was converted to an ETF. It now offers investors the opportunity to buy units of the managed fund on the ASX, making it an active ETF. Magellan Financial Group also converted its fund structure, so all of its funds are listed, i.e., Magellan High Conviction Trust (ASX: MHH).
There is still come confusion as to the nomenclature of the new kind of product, which essentially combines the feature of a traditional unlisted managed fund and an ETF: sometimes they are called exchange-traded managed funds (ETMF), sometimes they are called “active ETFs,” and the Chi-X Australia exchange calls them “quoted managed funds (QMFs).” But we are likely to see a lot more of them, as both exchanges have simplified the process of bringing an unlisted fund to the exchange, and managers jump at the chance to add exchange distribution to their existing products.
The Australian Ethical High Conviction Fund will begin trading on Chi-X today, under ticker code AEAE. According to a company announcement, the ETF will be a publicly listed version of Australian Ethical’s high-conviction fund. The fund began investing last October and invests in an actively managed portfolio of between 20-35 S&P/ASX 300 stocks that fit the company’s ethical charter.
It’s the first managed fund that Australian Ethical has listed as an active ETF, giving all Australian investors access to the firm “award winning” ethical investment and high-performance strategies. As at the end of last year, the fund returned 2.9 per cent for December, which beat the market return and made it one of the best-performing funds from the Australian Ethical product suite.
The existing high-conviction fund is restricted to wholesale investors, whereas the listed ETF will open a channel to all Australian investors. Australian Ethical says, “With rising demand for ethical investing, there is a growing need for access to authentic, true-to-label, and robust investment solutions across a range of different channels.”
It’s clear that this is the direction the winds are blowing for the managed fund world; we could well be seeing the beginning of the end of the old managed fund structure as we know it. Perhaps the ASX and Chi-X Australia will eventually be home to all funds one day, rendering the terms “listed” and “unlisted” redundant.
