The Vaughan Nelson Global Equity SMID Fund (Quoted Managed Fund) (the “Fund”) is a newly established Exchange Traded Managed Fund (ETMF) with the ASX code VNGS. The Fund provides exposure to the Vaughan Nelson Global SMID Cap strategy, which has an inception date of June 2020. The Fund is the quoted class of the investment strategy with the strategy also being offered through an unlisted unit trust. The Fund seeks to provide exposure to small and mid cap global equities with the objective of outperforming the MSCI ACWI SMID Cap Index, after fees and expenses and before taxes, on a rolling five year basis. The Responsible Entity (RE) of the Fund is Investors Mutual Limited who has appointed Vaughan Nelson Investment Management L.P (the “Manager”) as the Manager of the Fund.
The Manager is a US based asset manager that was founded in 1970 and provides equity and fixed income strategies with US$15.5b AUM as at 31 December 2021.
The Manager has a fundamental, bottom-up investment process with a targeted return approach. The portfolio only incorporates stocks that the Manager believes can generate returns of 50%+ over a
three-year period (~15%p.a. compounded), in the event the investment thesis plays out as expected. The Manager seeks to take advantage of short-term inefficiencies to generate excess returns. The portfolio will typically comprise 40-80 positions with the allocation to a single investment typically not exceeding 5% at the time of investment and the top 10 holdings typically accounting for 20%-25% of the portfolio. The strategy is managed in a benchmark unaware manner with the portfolio typically having an active share of greater than 90%. The Manager uses proprietary factor analysis to ensure that the portfolio is
diversified across factors and that the strategy does not have unintended factor bets. This allows the Manager to build a relatively concentrated portfolio while being representative of the investment universe from a risk profile perspective.
Independent Investment Research (IIR) has assigned the Vaughan Nelson Global Equity SMID Fund (Quoted Managed Fund) (ASX: VNGS) an Investment Grade rating. IIR views the Manager to have an experienced investment team and disciplined investment process. The investment philosophy and process has generated strong outperformance in the US market, however we note the Manager has limited experience in international equities and the Global SMID Cap strategy that the Fund provides exposure to has a limited track record. The Manager has recruited international equity expertise, however they remain relatively new to the team. The Fund is newly established and will have low levels of FUM initially. We expect the Fund to have limited levels of secondary market liquidity initially, however we anticipate this will improve as the size of the Fund grows. Click here to view the full report.