The Investlinx Capital Appreciation ETF (A global equity fund, ticker: LINXC IM) and the Investlinx Balanced Income ETF (Global multi asset fund, ticker: LINXB IM) have achieved ~23 per cent and ~13 per cent annualised returns over the two years since their inception.
Samuel Smith, CEO and CIO of the firm, explains that the firm was founded with a focus on active ETFs and the aim of: “trying to provide superior risk-adjusted returns against passive ETFs and our active mutual fund counterparts.”
The firm launched two years ago with EUR150 million in assets and has seen that grow to EUR225 million. It was backed from the outset by some fairly heavyweight institutional and family office support through founder Mario Bonaccorso, former managing director of investments at the Agnelli family listed holding company Exor.
The two ETFs are currently listed on the Borsa Italiana with a planned Deutsche Borse listing this year and the London Stock Exchange next year.
Smith says: “Our investment philosophy is to apply parts of the private equity mindset to public market investing and that means that we have a longer time horizon – six years – and a deep understanding of our portfolio companies. For us active means how different are we versus passive indices and our holdings are 80 per cent different from major indices. The companies we are invested in are mostly large cap listed companies, today we have 29 which we have high conviction in.”
The firm uses fundamental, bottom-up research for its portfolio and in terms of the bonds in the multi-asset product, they mostly use investment grade corporate bonds denominated in Euros.
The capital appreciation equity fund has seen 35 per cent lower drawdowns than the broader market, Smith says, and the balanced income multi-asset fund has outperformed other multi asset class ETF peers.
“The performance is broad-based,” Smith says. “There are very few investments that have not performed but when you look at the companies we are invested in, 90 per cent are up. We are high conviction but diversify ourselves across themes, geographies and sectors.”
The firm decided to launch its portfolios within the ETF wrapper for a number of reasons.
Smith says, “When I look across the European landscape in ETFs, the vast majority of capital is in passive funds, then passive-plus funds, such as smart beta or research enhanced funds, as they tend to have a low tracking error so performance is similar to passive benchmarks.”
“Thematic funds make up the rest of the landscape, where some of their themes makes sense but I always feel that the downside is the implementation. There will be 50 holdings, with a few good companies, but then the rest is filled with companies much less related. So, when we look at pure active funds in Europe, there is just a handful, 0.1 per cent, in real active funds within the ETF universe and this is the gap we are filling.”
“In terms of bonds or multi-asset funds, a lot of our peers are funds of ETFs or are investing from a macro top-down lens. We are very much bottom-up investors and invest directly into securities, so we feel we are pretty unique, there is a gap in the market and we have developed something quite interesting.”
As a new firm trying to raise assets, Smith says they are initially focusing on financial advisers and sophisticated private individuals.
“Fundamentally the products we have created are core holdings for any portfolio, both retail and professional. We will need a three to five years track record to attract more institutional money.”
Italy, specifically the Borsa Italiana listing, is where the heart lies at the moment, not least because they are able to offer their active product with significantly lower fees to the Italian market, but that Germany expansion is on the cards.
“Our philosophy is more like Apple, offering a few core simple products. We live in a complex world, so we use no derivatives, no leverage, no shorting and no securities lending. All our solutions are core and simple.”
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