A new Wanaka-based passive wholesale boutique fund manager, chaired by a founder of Brook Asset Management, plans to lodge a retail licence application before Christmas, according to co managing director, Thom Bentley.
Bentley said EBT Capital, which invests in a range of seven global exchange-traded funds (ETFs) via a trio of portfolio investment entity (PIE) wholesale products, hoped to make a foray into the retail market early in 2018 pending licence approval.
However, he said EBT would first market its range of PIE-wrapped ETFs to wholesale investors from the official launch date of January 1 next year.
“It won’t be appropriate for all wholesale investors but we think there will appetite among the small to medium funds and charities,” Bentley said.
Boasting co-founder of the legendary NZ active manager Brook, Simon Botherway, as chair, EBT was formed by Wanaka-based US ex-pat entrepreneur, Steven Turner. Turner, who made his fortune as part-owner of corporate information provider Capital IQ (sold to S&P in 2004 for US$200 million), moved to Wanaka in 2009.
Bentley said as a fan of the passive approach and ETFs for his own wealth, Turner saw a niche in the NZ market for low-cost index-trackers packaged for local investors that offer liquidity and currency hedging advantages over the NZX-owned Smartshares range.
“If you have a significant amount of money moving in or out of an ETF that’s difficult when you’re looking at daily turnover levels of about $20,000-30,000 for some Smartshares funds,” he said.
While investors can buy offshore ETFs in NZ he said brokerage costs could push fees up “by an order of 10-times more what US investors pay”.
The three EBT PIEs – Global Equity, US Equity, and Global Short-Term Debt funds – feed into a range of ETFs offered by BlackRock (iShares), Vanguard, and State Street’s SPDR. As well as an ‘all-in’ EBT management fee of 0.5 per cent, the products include underlying fund fees ranging from about 0.04 per cent to 0.11 per cent, Bentley said.
“As we gain scale we will reduce fees,” he said.
Bentley said the funds would not be screened at the NZ end for environmental, social and governance (ESG) issues given they invest wholly into the underlying indices.
“We, like the ETFs in our portfolios, do not make any active investment decisions,” he said. “However, our chosen managers (Vanguard, BlackRock and iShares) do have ESG policies with the companies they own. In other words, while these ETFs track the index, the ETF providers understand they have a responsibility to engage with company management on ESG issues and present and vote on their views where appropriate.”
Otago University PhD finance student, Sebastian Gehricke, helped select the underlying ETFs from a pool of about 40,000 funds, Bentley said.
“But once you screen out ETFs with less than $500 million then that cuts out about 90 per cent of the universe,” he said.
Gehricke is researching the trading volatility dynamics of ETFs.
EBT has appointed Trustees Executor as supervisor, custodian and administrator for the funds.
In a statement Botherway, said: “[EBT] portfolios hit on some important themes in today’s market – passive investing is playing an increasingly important role in diversified portfolios. ETFs make a lot of sense, low fees will play a significant role in fund performance, and allocation to global assets is critical for all long-term investors.”
Bentley also runs third-party specialist fund marketing firm, Remarkable Capital, which counts Mint Asset Management, Insync Global, and Constellation Capital as clients.