New active ETF to deliver strong income

InvestSmart Group debuted its first listed fund – an active exchange-traded fund (ETF) aimed at delivering income to investors without sacrificing capital gains – on the Australian Securities Exchange (ASX) today.

The InvestSmart Australian Equity Income Fund attracted more than three times its funds under management target, closing at more than $30 million.

The active ETF mirrors the group’s existing unlisted Intelligent Investor Equity Income Portfolio, which has an estimated income of 5.3 per cent a year and has returned 11.5 per cent a year since inception, outperforming its benchmark of 7.9 per cent.

Commenting on the launch, InvestSmart head of funds management Alastair Davidson said he was excited to see the group’s first active ETF trading on the ASX, giving every investor the opportunity to access the strong-performing portfolio in a listed format.

“Investors hunting exclusively for yield-based stocks can become caught up in companies that pay well initially but have poor long-term prospects,” Davidson said.

“We believe it is imperative to consider both the growth outlook of a company and its ability to pay dividends.

“Therefore we focus on undervalued, cash-rich businesses with the expectation that they will produce strong cash flows to support dividends in the future.”

The active ETF provides exposure to a concentrated portfolio of up to 30 Australian equities with a sustainable income, actively managed by a team that has a research track record of more than 20 years.

While the fund holds some bank stocks, its exposure is currently less than 9 per cent compared to more than 22 per cent in the ASX 200.

In InvestSmart’s view, having a large weighting to banks is imprudent and in the current environment risks in the sector are increasing.

“The launch of the active ETF will give investors access to a professionally managed, strong-performance portfolio in a simple and cost-effective way,” Davidson said.

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