A new growth ETF which mirrors a strategy with a 20-year track record is set to list on the ASX early next month, aiming to achieve returns of 2% per annum above the S&P/ASX 200 benchmark at a 0.97% management fee.
Intelligent Investor's Australian Equities Growth Fund, set to list on the ASX under the ticker code IIGF, has reached its minimum listing requirements and is expected to debut on the ASX on October 5.
The fund has a limited initial offer of $100 million, with a minimum investment of $2500 (1000 units). The portfolio will consist of 10 to 35 ASX-listed investments, with a maximum holding in any one share of 15%.
Managed by portfolio manager Nathan Bell, the fund's top holdings include online classifieds business Frontier Digital Ventures, investment management firm Pinnacle, employment marketplace Seek, developer RPM Global Holdings and digital audio technology company Audinate.
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The fund also invests in heavily discounted cyclicals, including Star Entertainment and Crown Resorts.
These deep value stocks have significant growth upside, Bell said, yet to be factored into their share price in the COVID environment.
"Star's current market capitalisation of just $2.5 billion means investors are getting the Sydney and Gold Coast casinos for a steal, and this is what value investors call a big margin of safety," he said.
"The company's share price could more than double over the next few years, which is why it's also a key portfolio holding."
Bell's stock selection is heavily focused on investing in owner-managed businesses; those that have skin in the game, which he believes is one of the most reliable ways to outperform the market.
"The owner/managers' ability to increase competitive advantages during a downturn, has been instrumental in these companies taking market share off competitors that have pulled back on critical investments and marketing during COVID," he said.
This is reflected in the portfolio's holding in Frontier Digital Ventures and Pinnacle Investment Group, he said, as well as its holding in 360 Capital.
Pinnacle insiders own a 50.58% stake in the business, while managing director Ian Macoun controls over 10%, he said. Similarly, 360 Capital managing director Tony Pitt owns a 29.07% stake in his funds management group.
Intelligent Investor was acquired into the InvestSMART family in 2014, and has since listed both its Ethical Share Fund (ASX: INES) and its Australian Equity Income Fund (ASX: INIF) on the ASX.
InvestSMART is chaired by Paul Clitheroe and features the likes of Alan Kohler, Ron Hodge, Catherine Teo, and Alastair Davidson on its investment committee.
Bell has been a portfolio manager at InvestSMART for two years, having previously worked as the research director of Intelligent Investor for more than nine years until June 2015. In between the two roles he worked as the research director of international equities value manager Peters MacGregor Capital Management.