A newly formed investment advisor is launching an actively managed ETF aiming to provide exposure to several long-term disruptive trends.
The Future Fund Active ETF (FFND) launched on the NYSE Arca Tuesday, carrying an expense ratio of 1.01%. It is co-managed by Gary Black, former CEO of the $464 billion Aegon Asset Management, and David Kalis, a former chief investment officer of the hedge fund Curvature Capital Management.
FFND places few restrictions on its investable universe of securities, save for its goals to invest at least 80% of its funds into U.S.-listed equities or depository receipts and 65% to be in midcap and large cap companies. The fund will also disclose its holdings daily.
The investment strategy is designed around buying into future growth opportunities within a handful of high-conviction “megathemes” for changes in the world, including but not limited to technology, consumer preferences, regulatory shifts, the climate and long-term supply and demand shifts.
From there, the fund sets a price target for the approximately 40 holdings it expects to have within five to 10 years.
If some of those themes seem familiar, it’s because ARK Invest Management has several of those themes in their own more concentrated funds for a discount of at least 25 basis points.
In an interview, Black said having a broader basket of themes is more conducive toward the firm’s stock-picking strategy. He also argues that having multiple themes reduces concentration risk, a phenomenon that has led the ARK funds into losses or thin returns so far this year.
“Our portfolio has a broader mandate,” he said. “We’re looking for companies that will change the world, and they’re going to capitalize on all of these megatrends. When you look across the 40 or so names in our portfolio, they're going to be less correlated with each other.”
The fund may also take short positions if an opportunity to generate alpha arises, or if it wants to hedge exposure against a holding. Black said this can take multiple forms, including selling put options against one of its long-term holdings to profit off a potential down quarter, but without the intention of selling those shares.