27 newly launched funds and ETFs on investor radars

You’d think with the thousands of listed and unlisted funds already available to Australian investors that we’re spoilt for choice when it comes to investment options. How many different ways can you invest in the ASX200 or NASDAQ?

However, with 153 new funds hitting the market in the past 12 months it’s clear that innovation and the lure of raising additional funds means investors will continue to be presented with new alternatives.

When I looked over the list of new offerings a few trends emerged that appear to underpin the continued growth in funds available to Australian investors.

1. The continued growth of active and passive exchange traded funds (ETFs).
2. Proven performers capitalising on their reputations and bringing new products to market.
3. Investor appetite to the opportunity in alternative strategies and asset classes.

At a high level these trends are positive for investors. Using ETFs reduces friction in the investment process, getting access to proven performers is a win, and investors are getting access to alternative strategies that were previously only available to institutions.

As part of Livewire’s 2024 Undiscovered Funds Series we surveyed 730 investors across the Livewire and Market Index websites to ask if they would consider investing in funds with less than 3-year track record, the factors that matter most in their selection process, the funds that they have used and those they are considering. 

In this wire, I’ve summarised some of the key findings and attached a spreadsheet with the funds being used and considered by survey participants.

Important note: The list of funds is not a recommendation to invest and you should conduct your own research and consult a financial advisor before making an investment decision.

Older, wealthy investors cautious on markets right now

There is a slight risk-off sentiment within the survey participants, with 40% saying they are neutral on markets and 20% saying they are cautious.

Perhaps that’s because markets have ripped higher over the past 6 months, with many indices hitting new all time highs. It could also be reflective of the older demographic that participated in the survey, with 90% of respondents being 45 years or older.

It’s also worth noting that 57% also identified as being sophisticated investors. It makes sense that an older and wealthier audience would adopt a slightly more cautious stance.

Research ratings matter, 3-year track record not as much

Ratings houses such as Lonsec and Zenith play a critical role for financial advisers and presented a clear barrier for 50% of survey respondents who said that no research rating was a show stopper.

Track record, however, was less of an issue with 75% of respondents saying they have already invested or are considering investing in a fund with less than a 3-year track record.

These were the top factors considered when evaluating a fund with track record of less than 3 years

1. Management team are co-invested
2. Past performance of the management team
3. Exposure to a specific asset class
4. Alignment with my personal objectives and risk tolerance
5. Attractive fee structure

The major barriers to investment were high minimum investments, lack of familiarity with the fund manager and lack of research availability.

It’s also worth noting that a number of participants said they choose not to invest in Managed Funds. The reasons given ranged from a preference to invest directly in shares as well as a belief that low cost ETFs are a better solution.

Where are the gaps?

Global, emerging market and frontier markets were three areas where investors were seeking additional equity options.

There was equally strong appetite in the Alternatives bucket with participants seeking additional options in private equity and sector-specific or niche strategies such as “special situations” funds.

Funds targeting themes such as Artificial Intelligence (AI) also received a lot of interest. One of my favourite suggestions was an ETF tracking the ASX minus 3 of the big banks!

A comprehensive list of tips from your fellow investors

Now, I won’t lie - I thought I was going to be most interested in the funds that our readers are using or considering, which are in the spreadsheet attached to this wire. However, the list of tips for staying out of trouble is seriously impressive.

Some investors have been burnt and many are aware of the risks associated with investing in unproven or new strategies. The list below is broken into the common themes that came from your responses.

Due Diligence and Research

• Do thorough research and due diligence
• Research the management team's background, experience, and track record
• Understand the investment strategy, process, and thesis
• Check licences, custodians, and corporate governance
• Research the underlying holdings and their viability

Risk Management

• Be cautious and exercise scepticism
• Start with a small investment and diversify
• Be prepared for volatility and potential losses
• Set stop-losses and be prepared to exit early if needed
• Only invest what you can afford to lose
• Understand and acknowledge your own risk tolerance

Alignment and Transparency

• Ensure alignment with your investment objectives and risk tolerance
• Look for transparency and communication from the fund
• Ensure the management team has "skin in the game" (invested in the fund)
• Engage with the manager to gauge transparency and alignment

Long-term Perspective

• Be patient and take a long-term view
• Understand that outperformance may only last for the first few years
• Stick to your long-term strategy and investment thesis

Management Team Evaluation

• Understand the management team's background, experience, and track record
• Evaluate the team's credentials, reputation, and ethical standing
• Assess the team's investment process and differentiation from others

Alternative Considerations

• Consider low-cost index funds or ETFs as alternatives
• Invest in emerging global trends or thematic strategies
• Carefully critique the strategy against macroeconomic views

Download the Undiscovered Funds Spreadsheet

To access more detail from the survey you can click here to see the multiple choice responses and download the spreadsheet see 27 newly launched funds and ETFS on investors radars.

Thanks for taking the time to share your perspectives.